Australia
Regional Industry Potential for Woody Biomass Crops in Lower Rainfall Southern Australia FLORASEARCH 3C
Regional Industry Potential for Woody Biomass Crops in lower rainfall southern Australia FloraSearch 3c Edited by Trevor J. Hobbs
August 2009 RIRDC Publication No 09/045 RIRDC Project No UWA-98A
© 2009 Rural Industries Research and Development Corporation. All rights reserved.
ISBN 1 74151 848 2 ISSN 1440-6845 Regional Industry Potential for Woody Biomass Crops in lower rainfall southern Australia - FloraSearch 3c Publication No. 09/045 Project No. UWA-98A The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to the RIRDC Publications Manager on phone 02 6271 4165 Researcher Contact Details Trevor J. Hobbs SA Dept. of Water, Land and Biodiversity Conservation, W Road, Urrbrae SA 5064 08 8303 9766 Fax: 08 8303 9555
[email protected] In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form.
RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: Fax: Email: Web:
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[email protected]. http://www.rirdc.gov.au
Electronically published by RIRDC in August 2009 Print-on-demand by Union Offset Printing, Canberra at www.rirdc.gov.au or phone 1300 634 313
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Foreword The dryland agricultural regions of southern Australia face many natural resource management challenges. Following a long history of widespread vegetation clearance for the development of annual crops and pastures these landscapes now experience significant environmental issues including dryland salinity, soil erosion and other losses of ecosystem function. Broadscale restoration of deeprooted perennial vegetation to these landscapes can help to address many of these problems and provide opportunities for more sustainable and resilient farming systems in a world of diverse markets and variable climate. The significance of carbon emissions has added to the potential importance of perennial woody crops which offer opportunities for mitigation and adaptation to changing conditions. Woody perennial systems can accumulate and store significant quantities of carbon in both living plant biomass and soil profiles and provide offsets as an alternative feedstock for energy and transport fuel production. A mosaic of land uses including tree crops driven by large-scale industrial markets, agricultural systems using annual and perennial crops, and biodiversity resources has an important role to play in Australian landscapes and sustainability of agricultural systems and rural communities. Since 2002, the FloraSearch project has researched selection and development of new woody crop species to supply feedstock for large-scale markets, including wood products, renewable energy, carbon sequestration and fodder. FloraSearch 3 series of reports present the findings of the latest phase of this research, focussing on a suite of Australian native species and industries suited to new broadscale woody crops and their associated commercial industries. The results of this work are presented in three volumes, with the first providing in-depth information on the productive potential and agronomy of prospective new crops; the second enlarging on the domestication potential of 3 high priority species; and the third analysing regional industry potential for woody biomass crops in southern Australia (this report). This project was funded by the Joint Venture Agroforestry Program (JVAP), which is supported by three R&D Corporations - Rural Industries Research and Development Corporation (RIRDC), Land and Water Australia (LWA), and Forest and Wood Products Research and Development Corporation1 (FWPRDC). The Murray-Darling Basin Commission (MDBC) also contributed to this project. The R&D Corporations are funded principally by the Australian Government. State and Australian Governments contribute funds to the MDBC. Significant financial and in-kind contributions were also made by project partners in the Future Farm Industries Cooperative Research Centre: SA Department of Water, Land and Biodiversity Conservation; WA Department of Environment and Conservation; CSIRO; NSW Department of Primary Industries; and Department of Primary Industries Victoria.
1
Now: Forest & Wood Products Australia (FWPA)
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This report is an addition to RIRDC’s diverse range of over 1800 research publications. It forms part of our Agroforestry and Farm Forestry R&D program, which aims to integrate sustainable and productive agroforestry within Australian farming systems. The JVAP, under this program, is managed by RIRDC. Most of RIRDC’s publications are available for viewing, downloading or purchasing online at www.rirdc.gov.au. Purchases can also be made by phoning 1300 634 313.
Peter O’Brien Managing Director Rural Industries Research and Development Corporation
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Acknowledgments The editor acknowledges the Joint Venture Agroforestry Program (JVAP), Future Farm Industries Cooperative Research Centre (FFI CRC) and CRC for the Plant-based Management of Dryland Salinity for funding this project. We would also like to recognise the significant support of our parent organisations - SA Department of Water, Land and Biodiversity Conservation and WA Department of Environment and Conservation. Thanks to Avon Catchment Council and the Oil Mallee Association for their support of WA mallee biomass studies, and the Australian Government and the SA Centre for Natural Resource Management for their financial support for the Upper South East case study. The input and helpful advice of project collaborators and interested supporters of the FloraSearch project is gratefully appreciated. This includes Rosemary Lott, Bruce Munday, Mike Ewing, Kevin Goss, Daniel Huxtable, Brendan George, Craig Neumann, David McKenna, Wayne O’Sullivan, Richard Giles, George Freischmidt, Graeme Olsen, Peter Georgaras, Don Cooper, Rob Sudmeyer, Col Stucley, Julian Morison, David Pannell, Richard Mazanec, Malem McLeod, Des Stackpole, Isla Grundy, Olivia Kemp, Peter Jessop, Peter Butler, Andrew Fisher and Joe Landsberg. We greatly appreciate the scientific research and administrative support of Merv Tucker, Gary Brennan, Julie Dean and Ligita Bligzna. Thanks to John Bartle for his enthusiasm towards developing new woody crops in southern Australia and his dedication towards the development of oil mallee systems in Western Australia. Mike Bennell is a great supporter of the development of fodder shrub systems in Australia and we look forward further adoption of this industry type across vast regions of Australia. Thanks to Mike for his input into the FloraSearch woody developments in recent years and enthusiasm for lignocellulosic ethanol. The editor also thanks Brett Bryan for his detailed commentary and formal review of this work, and Craig Neumann and David McKenna for detailed proofing of this report.
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Contents Foreword ................................................................................................................................................ ii Acknowledgments.................................................................................................................................. v Contents................................................................................................................................................. vi Executive Summary............................................................................................................................. xii 1. Introduction ....................................................................................................................................... 1 Overview........................................................................................................................................... 1 Prior research and development – WA Search and FloraSearch Stage 1 and 2................................ 3 FloraSearch Stage 3 - Report Structure............................................................................................. 4 FloraSearch 3a - Developing Species for Woody Biomass Crops ............................................. 4 FloraSearch 3b – Reviews of High Priority Species for Woody Biomass Crops....................... 4 FloraSearch 3c - Regional Industry Potential for Woody Biomass Crops ................................. 4 2. Prioritisation of Regional Woody Crop Industries ........................................................................ 6 Drivers and Market Opportunities .................................................................................................... 6 Key drivers for the development of new woody crops............................................................... 6 Farm forestry industries for lower rainfall regions..................................................................... 6 Woody crop production systems ................................................................................................ 8 Climate change and carbon sequestration .................................................................................. 8 Natural resource management .................................................................................................. 12 Wood fibre industries ............................................................................................................... 13 Energy ...................................................................................................................................... 19 Industrial carbon (coal, carbonised wood and charcoal) .......................................................... 20 Eucalyptus oil and other extractives......................................................................................... 21 Fodder industries ...................................................................................................................... 23 Australia-wide Industry Evaluations and Regional Opportunities.................................................. 26 JVAP Agroforestry Industry Evaluation Project...................................................................... 26 JVAP Prioritisation of Regional Opportunities for Agroforestry Investment Project.............. 29 Conclusions from JVAP “Regionals” projects......................................................................... 30 Scale of Potential in Lower Rainfall Regions ................................................................................. 32 Industry Engagement ...................................................................................................................... 33 Farm Economics and Regional Industry Potential Analysis........................................................... 34 Investment analysis (Discounted Cash Flows and Annual Equivalent Returns)...................... 34 Spatial economic analyses........................................................................................................ 35 Woody Crop Commodity Prices ..................................................................................................... 37 Export woodchips..................................................................................................................... 37 Australian pulpwood ................................................................................................................ 37 Medium density fibreboard (MDF) .......................................................................................... 37 Particleboard............................................................................................................................. 37 Bioenergy ................................................................................................................................. 38 Firewood................................................................................................................................... 38 Eucalypt leaf for oils ................................................................................................................ 38 Integrated wood processing plant (oil / charcoal / bioenergy) ................................................. 38 Fodder shrubs ........................................................................................................................... 39 Carbon sequestration ................................................................................................................ 39 Summary of FloraSearch commodity values 2006 and 2008................................................... 39
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3. Factors Affecting the Economic Performacne of Mallee Production Systmes........................... 41 Introduction..................................................................................................................................... 41 Mallee Biomass Production System................................................................................................ 42 Economic Analysis Methodology................................................................................................... 42 Base case scenario .................................................................................................................... 46 Sensitivities ..................................................................................................................................... 49 Scenarios ......................................................................................................................................... 52 Scenario 1: Higher value product options from leaf and residue fractions .............................. 52 Scenario 2: Manipulation of coppice cycle length ................................................................... 53 Scenario 3: Environmental services payments ......................................................................... 53 Scenario 4: Reduced establishment costs ................................................................................. 54 Scenario 5: System improvement on multiple fronts ............................................................... 55 Discussion ....................................................................................................................................... 56 4. Case Study 1: Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia ............................................................................................................................................... 59 Introduction..................................................................................................................................... 59 Energy Demands in Australia ......................................................................................................... 60 Thermal coal............................................................................................................................. 62 Transport Fuels ............................................................................................................................... 65 Liquid Biofuels ............................................................................................................................... 66 Bioethanol production in Australia .......................................................................................... 67 Biodiesel production in Australia............................................................................................. 68 Woody Biomass to Refined Energy Technologies ......................................................................... 68 Pyrolysis ................................................................................................................................... 68 Biomass to transport fuel.......................................................................................................... 70 Biomass to ethanol ................................................................................................................... 71 Biorefining................................................................................................................................ 73 Fuel pellets ............................................................................................................................... 73 Integrated tree processing plant (oil / charcoal / bioenergy) .................................................... 74 Regional Woody Crop Production.................................................................................................. 74 Regional Industry Potential Analysis for Bioenergy 2008 ............................................................. 77 New industry modelling approach............................................................................................ 77 New industry economic and spatial evaluations....................................................................... 78 5. Case Study 2: Woody Crop Potential in the Upper South East Region of South Australia ............................................................................................................................................... 91 Introduction..................................................................................................................................... 91 Woody Crop Production ................................................................................................................. 97 Growth data .............................................................................................................................. 97 Regional productivity predictions ............................................................................................ 99 Natural Resource Management Issues and Benefits of Revegetation........................................... 100 Soil salinity and wind erosion risk ......................................................................................... 103 Ecosystem fragmentation and degradation............................................................................. 104 Overall environmental risk ..................................................................................................... 104 Carbon sequestration potential ............................................................................................... 104 High Priority Industry Types for the SA Upper South Region..................................................... 112 Wood fibre industries ............................................................................................................. 112
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Firewood................................................................................................................................. 112 Bioenergy for electricity generation....................................................................................... 112 Eucalyptus oil and integrated wood processing ..................................................................... 113 Fodder industries .................................................................................................................... 113 Carbon sequestration .............................................................................................................. 113 Regional Industry Potential Analysis 2006................................................................................... 113 Existing Dryland Annual Cropping and Livestock Industries ...................................................... 114 New Industry Modelling Approach .............................................................................................. 114 New Industry Economic and Spatial Evaluations......................................................................... 118 Discussion ..................................................................................................................................... 126 6. Conclusions and Future Directions.............................................................................................. 129 Industry Priorities, Economics and Spatial Analyses ................................................................... 129 Future directions..................................................................................................................... 131 Optimising Productivity Through Landuse Planning, Agronomic Designs and Wateruse........... 131 Future directions..................................................................................................................... 134 Harvester Technologies................................................................................................................. 135 Economic Feasibility .................................................................................................................... 135 References .......................................................................................................................................... 139
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Tables Table 1. Table 2. Table 3. Table 4.
Kyoto Accounting - Australian carbon dioxide equivalent emissions by sector in 2005. ......................10 Volumes of roundwood consumed by Australian forest industries in recent years. ...............................16 Australian production, trade and consumption of fibre/particle panel products in recent years. ............16 Australian production, trade and consumption of paper products, and woodchip exports in recent years. .....................................................................................................................................................17 Table 5. Value of wood product exports and imports in Australia in recent years. ..............................................18 Table 6. Recent historical, and predicted, volumes and values of Australia metallurgical coal exports...............20 Table 7. The value of extractives and other miscellaneous forest products...........................................................22 Table 8. Indicative scale required for high to medium rainfall zone competitive forest product processing facilities. ................................................................................................................................................29 Table 9. Comparison of URS Forestry and CSIRO rankings of existing industry opportunities in National Plantation Industry regions in Australia................................................................................................31 Table 10. Potential area available to new woody crop production in the lower rainfall regions of southern Australia. ...............................................................................................................................................32 Table 11. Primary production, freight costs and discount rate used in regional industry potential analysis. .......36 Table 12. Summary of estimated 2006 and 2008 delivered feedstock values by industry type............................40 Table 13. Moisture content of above ground biomass (whole tree and components) of E. loxophleba subspecies lissophloia in Western Australian farm plantings. ..............................................................44 Table 14. Base case scenario assumptions used in economic analysis model ......................................................47 Table 15. Percentage change in production/revenue parameter values required for the mallee production system to provide an EAR of $66.80/hectare (from land where agricultural production is displaced). .............................................................................................................................................52 Table 16. The effect of reducing cost parameter values to zero on mallee production system EAR (from land where agricultural production is displaced). .........................................................................................52 Table 17. Recent and projected production and export of thermal coal in Australia............................................62 Table 18. Recent and projected electricity generation by fuel type in Australia...................................................63 Table 19. Energy content of major solid fuels in Australia...................................................................................64 Table 20. The calorific value and carbon content of major southern Australian coal resources...........................64 Table 21. Recent historical, and predicted, volumes and values of Australia thermal coal exports. ....................64 Table 22. The calorific value and carbon content of selected Australian hardwood species. ...............................65 Table 23. Primary production, freight costs and discount rate used in regional industry potential analysis for woody bioenergy crops in 2008. ...........................................................................................................79 Table 24. Proportion of vegetation and land use classes in the Upper South East region. ...................................96 Table 25. Species suited to the four major biomass industry classes and climatic zones of the Upper South East region.............................................................................................................................................99 Table 26. Regional conservation and dryland agricultural lands (potential agroforestry) affected by deep drainage, salinity and wind erosion risk by land subdivision (Hundreds). .........................................108 Table 27. Estimated unharvested above-ground carbon dioxide sequestration rates and district totals by land subdivision (Hundreds) and agroforestry species group. ....................................................................109 Table 28. Primary production, freight costs and discount rate used in regional industry potential analysis. .....117 Table 29. Economically optimum harvest cycles, delivery locations and estimated 2006 delivered feedstock values by industry used in regional industry potential analysis. .........................................................118 Table 30. Summaries of expected annual equivalent returns [$/ha/yr] from existing cropping and grazing industries, and new agroforestry industries by subdivision. ...............................................................124 Table 31. Summaries of expected plantation productivities, environmental risks and landholder annual equivalent returns from existing and potential biomass industries (minimum, maximum and average values for 53 Hundred subdivisions). ....................................................................................128
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Figures Fig. 1. Fig. 2. Fig. 3. Fig. 4. Fig. 5. Fig. 6. Fig. 7. Fig. 8. Fig. 9. Fig. 10. Fig. 11. Fig. 12. Fig. 13. Fig. 14. Fig. 15. Fig. 16. Fig. 17. Fig. 18. Fig. 19. Fig. 20. Fig. 21. Fig. 22. Fig. 23. Fig. 24. Fig. 25. Fig. 26. Fig. 27. Fig. 28. Fig. 29. Fig. 30. Fig. 31. Fig. 32. Fig. 33. Fig. 34. Fig. 35. Fig. 36. Fig. 37. Fig. 38. Fig. 39. Fig. 40. Fig. 41.
The FloraSearch study area (shaded) contains the low rainfall winter cereal growing areas of southern Australia. ..................................................................................................................................2 Kyoto Accounting - Net Australian carbon dioxide equivalent emissions since 1990. ........................11 The European Carbon Exchange (ECX) settlement price and volumes in recent times. ......................12 Historical volumes of roundwood harvested, consumed, exported and imported by forest industries in Australia (financial years ending 1961 to 2007)...............................................................14 Volumes of forestry roundwood consumed by Australian industry product groups in recent years. ...14 Australian hardwood and softwood export chip quantities. ..................................................................15 Australian hardwood and softwood export chip prices. ........................................................................15 Primary energy consumption across all energy sectors in Australia (1973 to 2007). ...........................20 Trends in world market prices of Eucalyptus oils in recent years.........................................................23 The average sale value per head of prime lambs and cattle in Australia in recent years. .....................24 The number of head of livestock held in feedlots for the December period over recent years by state. ......................................................................................................................................................25 National plantation inventory (NPI) regions in Australia. ....................................................................27 Australia-wide farm forestry market opportunities by product, ranking and time scale in Australia as identified by URS Forestry in 2008. .................................................................................................28 Potential low rainfall woody crop areas of Australia. ...........................................................................33 Dry wood and leaf proportions of standing dry biomass against standing green biomass, for “first harvest” mallees across 11 sites in Western Australia. Standard errors of estimates are also shown. ..44 The zones of influence of a mallee belt where it has displaced a portion of a conventional agricultural production system. .............................................................................................................45 Mean annual operating profit for the top 75% of farming businesses in the 300-400mm zone of south western Australia (source Bank West; CPI adjusted)..................................................................46 The proportion of standing dry biomass which is wood and leaf against standing green biomass, for 82 individual trees. ..........................................................................................................................48 The Base Case Scenario – EAR of a mallee production system against coppice growth rates (expressed as mean annual growth increment in dry tonnes of above ground biomass per year) for base case assumptions. ..........................................................................................................................49 Sensitivity to delivered biomass price...................................................................................................50 Sensitivity to harvest cost......................................................................................................................50 Sensitivity to establishment cost. ..........................................................................................................51 Sensitivity to no yield zone width. ........................................................................................................51 Plot biomass1 against standing stem density for 5-9 year old plots of E. loxophleba ssp. lissophloia in Western Australia (n=210)................................................................................................................55 Cumulative improvement in mallee production system profitability, where gains are made across a suite of production parameters. .............................................................................................................56 Primary energy consumption across all energy sectors in Australia since 1973-74..............................60 Cost of electrical energy in Australia in recent years............................................................................61 Modelled expected prices for Renewable Energy Certificates in Australia. .........................................62 World recent and projected global import volumes of thermal coal. ....................................................63 Indicative world oil prices (West Texas Intermediate) in recent years. ................................................66 Green biomass productivity of bioenergy species in southern Australia (at 1000 plants per ha). ........75 Green biomass productivity of oil mallee species in southern Australia (at 1000 plants per ha)..........76 Influence of road speed on 2008 freight costs used in spatial economic models..................................79 Southern Australian mainland population centres and sizes. ................................................................80 Existing electricity infrastructure in southern Australia........................................................................81 Southern Australia electrical energy - present consumption centres and demand. ...............................82 Electricity demand versus supply distance in southern Australia based on population driven demand. .................................................................................................................................................83 Maximum green biomass productivity of bioenergy and oil mallee species in southern Australia (at 1000 plants per ha)...........................................................................................................................84 Existing and potential bioenergy generation facilities with capacity or potential to use woody biomass feedstocks in southern Australia. ............................................................................................85 Existing, currently offline and proposed liquid fuel refineries in southern Australia. ..........................86 Bioenergy annual equivalent returns based on $20/green tonne delivered price at existing and proposed facilities in southern Australia. ..............................................................................................87
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Fig. 42. Fig. 43. Fig. 44. Fig. 45. Fig. 46. Fig. 47. Fig. 48. Fig. 49. Fig. 50. Fig. 51. Fig. 52. Fig. 53. Fig. 54. Fig. 55. Fig. 56. Fig. 57. Fig. 58.
Bioenergy annual equivalent returns based on $30/green tonne delivered price at existing and proposed facilities in southern Australia. ..............................................................................................88 Bioenergy annual equivalent returns based on $40/green tonne delivered price at existing and proposed facilities in southern Australia. ..............................................................................................89 Oil Mallee ITP annual equivalent returns based on $40/green tonne delivered price at existing and proposed facilities in southern Australia. ..............................................................................................90 The focus area of the Upper South East biomass study. .......................................................................92 Landuse and vegetation cover types in the Upper South East region. ..................................................93 Generalised soil groups and inherent fertility of soils in the Upper South East region. .....................100 Estimated annual stemwood production of Industry Species Groups in the SA Upper South East region. .................................................................................................................................................101 Estimated annual above-ground green biomass production of Industry Species Groups in the SA Upper South East region. ....................................................................................................................102 Natural resource management issues in the SA Upper South East region. .........................................106 Estimated unharvested annual CO2 sequestration rates of each Species Group in the SA Upper South East region. ...............................................................................................................................111 Average gross margins per hectare (2005 dollars) of combined cropping and livestock grazing enterprises for years 1990 to 2005. .....................................................................................................115 Estimated gross margin (2005 dollars) of combined cropping and livestock grazing enterprises. .....115 Influence of road speed on 2006 freight costs used in spatial economic models................................117 Existing infrastructure relating to biomass industries in the region. ...................................................119 Estimated primary producer returns from a range of Regional Industry Potential Analysis scenarios in the Upper South East region............................................................................................120 Regional prediction of economic return from wheat paddocks...........................................................133 Biomass supply flow chart. .................................................................................................................137
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Executive Summary What the report is about This report investigates the markets, economic drivers and spatial influences on developing commercial woody biomass crops in lower rainfall regions of southern Australia. This is done through surveillance of new markets and industries, detailed studies of production system economics, and spatial modelling and analysis for a range of industries and regions. It focuses on Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia and explores bioenergy opportunities for electricity generation and creation of liquid biofuels to replace fossil fuel consumption in Australia. A region specific spatio-economic analysis Woody Crop Potential in the Upper South East Region of South Australia identifies a region with significant potential for a wide range of woody crop industry types and investigates the feasibility of a range of industry types at high spatial resolution Who is the report targeted at? This report allows rural landholders, large scale biomass industries, government agencies and research managers to make informed decisions about appropriate species for new woody crop industry selections in the lower rainfall regions of southern Australia. It aims to influence decision makers at all levels involved in developing sustainable and productive agroforestry within Australian low rainfall farming systems. Background The over-arching goal of FloraSearch is the development of commercially viable, broad-scale woody perennial crops for low to medium rainfall agricultural areas of southern Australia. These crops need to suite integration with existing annual cropping and grazing systems providing a range of natural resource benefits, including improved dryland and stream salinity. They need to improve the resilience of agricultural systems in response to climate variability and form the foundation of new, large-scale rural industries. The FloraSearch Stage 3 series of reports builds on earlier FloraSearch research that commenced in 2002 and identified a range of prospective species and industries suited to development as new woody crops. The current work provides a greater focus on species suited for further development and has refined methodologies that can be used to interrogate the feasibility of new woody crop industries at a range of scales. The research is supported by the Joint Venture Agroforestry Program and the Future Farm Industries Cooperative Research Centre and operates out of two key nodes based within SA and WA State Government departments. FloraSearch Stage 3 presents the findings of the latest phase of this research and is reported in 3 volumes: •
FloraSearch 3a - Developing species for woody biomass crops (Hobbs et al. 2009a);
•
FloraSearch 3b - Domestication potential of high priority species (Acacia saligna, Atriplex nummularia and Eucalyptus rudis) for woody biomass crops (Hobbs et al. 2009b); and
•
FloraSearch 3c - Regional industry potential for woody biomass crops (this report, Hobbs 2009b).
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Aims/objectives The aims of FloraSearch Stage 3 are to: •
Assess the agronomic suitability of development species for cultivation in the wheat/sheep belt including adaptability and productive potential;
•
Evaluate species with merit for progression as commercial crops (development species) and initial a process for the domestication and improvement of plant species with greatest potential (focus species); and
•
Refine and adapt new industry evaluation methods, spatial analysis tools and to conduct scoping feasibility studies for new large-scale industries based on products from woody perennial production systems.
The objectives of the research described in this report are to explore potential market drivers and commodity values for large-scale woody crops in Australia; provide a better understanding factors affecting economic performance of woody crop production systems (e.g. the mallee belt system in WA); undertake economic and spatial analyses of potential bioenergy crops for southern Australia; and illustrate the ability of the regional industry potential analysis to evaluate a wider range of woody crop types and environmental benefits at a regional scale (e.g. Upper South East region of SA). Methods used Potential products and markets identified by our earlier work have been reviewed and re-prioritised based on new information on trends in expected market volumes and prices. This information has been extracted from the literature, online historical and current industry market data for both national and international markets, and through discussions with current biomass industry collaborators. Mindful that potential biomass markets are not static, we have been scanning commodity markets, environmental drivers, industry and political trends, and technological advances for emerging markets and industries that could potentially utilise large volumes of industrial feedstocks from short-cycle woody crop systems or create market values for environmental services such as carbon sequestration in the lower rainfall regions of southern Australia. Research into the integrated wood processing (IWP) model of crop production has been focussed in Western Australia for Eucalyptus spp. (mallees) to produce energy, charcoal and oils. We explore the feasibility of this system by detailed economic examinations of the influence of a range of productivity and production system variables on the likely annual equivalent returns for this woody crop system. We have built on these economic analyses to encapsulate spatial factors affecting woody crop productivity and returns, through the application of Regional Industry Potential Analysis (RIPA) methodologies, which combine geographic information system (GIS) data with economic models to evaluate the potential commercial viability for a wider range of woody crop industries. This report highlights the full potential of this analytical technique through two case studies on the RIPA methodology which was first described in the FloraSearch Phase 1 report (Bennell et al. 2008) using early estimates of productivity and preliminary models to illustrate the concept. This work has progressed and is becoming a sophisticated tool, able to support the systematic regional evaluation of perennial crop options at a range of scales. It incorporates improved species knowledge (e.g. productivity estimates), industry developments, updated costs and returns and refinements in the modelling process. The methodology has been recently adopted and modified to undertake other spatio-economic analyses for other industries and regions across Australia (e.g. JVAP Regional opportunities for agroforestry project, Polglase et al. 2008).
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Results/key findings Woody cropping systems in the lower rainfall regions of southern Australia provide numerous opportunities for commercial development of bioenergy, carbon sequestration, wood fibres and livestock production industries. These systems can also provide a wide range of environmental and community benefit across Australia. The scale of this potential is immense with over 57 million hectares in the lower rainfall regions of southern Australia currently used for cropping and grazing that could potentially be used to develop new sustainable woody crop industries. This study identifies industries that are more or less suitable to locations within dryland agricultural regions of southern Australia. The Factors Affecting the Economic Performance of Mallee Production Systems section illustrates that there are numerous influences on the viability of woody crop production systems in Australia. Using oil mallee production systems in Western Australia we have shown the need to maximise productivity for commercial viability through better plant selections, and crop designs that can harvest excess water from the landscape. We are also aware of the need to balance woody crop production with other landuses, and that the goal is an optimal overall farming system that has components of new woody crops and existing industry types to be successful. Establishment, silvicultural, harvest and land management practices are highly important in optimising returns from these systems. Where additional (and often off-site) environmental benefits can be valued, these can potentially provide a new income stream to these new crop systems. Case Study 1: Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia demonstrates there is immense potential to develop new woody bioenergy crops in southern Australia. Although prices of these new feedstocks are still tenuous, by comparing these product streams with internationally and Australian marketed commodities we can approximate likely feedstock values of woody biomass for these energy markets. The analyses do highlight the sensitivity of industry feasibility on commodity prices and production rates given the cost of growing, harvesting and transporting a currently low-valued product especially in remote and less productive landscapes. Increasing energy (electricity, heat and transport liquid fuels) demands and prices, and emerging conversion and harvest technologies suggest that bioenergy crops will soon play an important role in Australian agricultural landscapes. Case Study 2: Woody Crop Potential in the Upper South East Region of South Australia identifies a region with significant potential for a wide range of woody crop industry types. This case study is in a region that borders a higher rainfall zone with existing woodfibre industries (pulp, paper, particleboard production, woodchip export) and where there is existing interest in and use of fodder shrubs for livestock and timber for firewood. New bioenergy industries and potential carbon sequestration markets offer opportunities for landholders in this region and are likely to provide significant symbiotic (and perhaps competitive) economic returns to current cereal cropping and livestock grazing enterprises in the region. This study also explores the environmental benefits of woody crop systems and revegetation in the region. It has been used to identify specific districts that would most benefit from these new industry options. Implications for relevant stakeholders This research provides a solid base for development of several Australian species for woody crop production in the lower rainfall regions of southern Australia. It is work that is strongly supported by the Future Farm Industries Cooperative Research Centre, Joint Venture Agroforestry Program, several State Government departments, farm forestry researchers and several industry groups. We are developing new research and development opportunities by engaging further support of research and development corporations and new industry partners in Australia. The successful development of these new crop species can greatly diversify and improve agricultural landuse in many low-rainfall parts of southern Australia.
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The Regional Industry Potential Analysis methodology has been recently adopted and modified to undertake other spatio-economic analyses for other industries and regions across Australia (e.g. JVAP Regional opportunities for agroforestry project, Polglase et al. 2008) and used to inform analyses for the Garnaut Climate Change Review (Garnaut 2008, Chapter 22 Transforming Rural Land Use). Recommendations Many short-cycle woody crops and biomass industries complement existing farm enterprises, while the analyses presented in this report show that some can be profitable across vast regions of southern Australia. Indeed, the potential economic returns from several of these industry types in some regions can be comparable to those from existing land uses. The current and potential profitability and sustainability of perennial woody crops can therefore provide landholders with alternatives into the future. Further investment in research is required to progress the understanding of the spatial variability and economic influences on industry development in Australia. There is need to better understand processes to optimise productivity through better species selection, plant improvement, landuse planning, agronomic designs and effective water use in the landscape. Future work should strongly focus on more detailed studies such as variations in productivity and yields to enhance plant improvement processes and bring forth new candidates for domestication. Further agronomic and crop management research is also required to optimise productivity rates and sustainability of the new crops. Spatial variation in landscape productivity of both existing annual crops and new woody crops must also be further evaluated so that regional and whole-of-farm profitability can be optimised for agricultural landscapes facing the challenges of variable climates and dynamic markets and policy directions.
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1. Introduction Trevor J. Hobbs2,3, John Bartle1,2 and Michael Bennell2,3 1
Department of Environment and Conservation, Bentley WA 6983 Future Farm Industries Cooperative Research Centre, Crawley WA 6009 3 Department of Water, Land and Biodiversity Conservation, Urrbrae SA 5064 2
Overview The clearing of native vegetation systems for agricultural use has altered the natural hydrology, soils and ecology of many landscapes in southern Australia. These changes have led to the emergence of many natural resource management issues, including increased rates of landscape salinisation, reduced groundwater and stream quality, soil erosion, depleted environmental carbon stores and the loss of biodiversity. The targeted re-establishment of woody perennial plants in the 250-650mm winter dominated rainfall zone (Fig. 1) could help alleviate the scale of these detrimental effects (Bartle et al. 2007). To do this on the scale required, woody perennials must be economically viable and must either provide a commercial alternative to, or complement, current land uses (Bennell et al. 2008, Stirzaker et al. 2002). More recently the recognition of carbon emissions and the consequences of climate change have emerged as a critical world and national issue. This has led to great public interest in the emerging opportunity to re-establish woody perennial plants into our agricultural landscapes to both sequester carbon dioxide and adapt to a changing environment. While natural resources management (NRM) benefits have been a public motivation for revegetation in all its forms, this benefit is often only realised in the long term. For private landowners, a rational analysis of the immediate NRM benefits of revegetation on landscape productivity and health will seldom support any significant investment in revegetation. To provide public, and longer-term, natural resource management benefits from revegetation requires public investments and support to develop of commercially viable woody crops that are both attractive to farmers and have a complementary role in agricultural systems and broader environmental services (Bartle 1991, Bartle and Shea 2002, Bryan et al. 2005, Ward et al. 2005, Bryan et al. 2008, Pannell 2008). Commercial sawlog and pulpwood forestry in southern Australia is mainly limited to higher rainfall regions (650 - 1000mm mean annual rainfall). These industries are typically based on long-cycle rotations (>20 years) to grow large diameter logs which are transported to centralised processing facilities (Zorzetto and Chudleigh 1999). In medium to lower rainfall regions sawlog harvest cycles are even longer (Harwood et al. 2005) due to reduced water availability and slower growth rates. Recent rainfall trends and climate change predictions suggest that these long-cycle systems are likely to become progressively less viable in these regions. To develop an alternative to long cycle species a significant investments has been made in developing short cycle native species as woody crop options in lower rainfall regions. Investigations into the use of oil-bearing mallee species for woody crops indicate significant potential for development of these new crops in the wheatbelt regions of Australia (Bartle and Shea 2002, Bartle et al. 2007). In the 1990’s extensive research and development work on ‘oil mallee’ species commenced in Western Australia and was oriented towards the development of new industries based on commercial integrated wood processing systems yielding Eucalyptus oils, charcoal and bioenergy (Bartle and Shea 2002, Enecon 2001). An expanded focus of this work and diversification of potential industries led to the development of ‘WA Search’ (Olsen et al. 2004) and later the ‘FloraSearch Stage 1’ (Bennell et al. 2008) projects to systematically screen other Australian native flora for their potential as new woody crops. With the support of the Cooperative Research Centre (CRC) for Plant-based Management of Dryland Salinity and the Joint Venture Agroforestry Program (JVAP) these two project teams joined
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forces in 2004 under the banner of the ‘FloraSearch Stage 2’ project to further progress woody crop research and development across southern Australia. Building on the strengths and results of this alliance of researchers the work was further supported by the CRC (now Future Farm Industries CRC) and JVAP in 2006 as ‘FloraSearch Stage 3’. The FloraSearch project has made significant advances in developing novel crop options for the dryland agricultural region of southern Australia (Fig. 1). It integrates scientific advances in the biology of native plant species with agriculture and economics to demonstrate that woody crops have potential within the wheat/sheep regions. It begins the process of generating confidence that the best available information on biomass production for a range of products including carbon, bioenergy, extractives, fodder and wood products is available to landowners and businesses with aspirations in this area. New woody crop research and development, evolving out of FloraSearch ideas and information, will progress from within the Future Farm Industries Cooperative Research Centre and guide future woody biomass crop and industry development. Fig. 1. The FloraSearch study area (shaded) contains the low rainfall winter cereal growing areas of southern Australia.
Bounded by the low rainfall limit of cropping, winter-dominated rainfall areas, and the 650mm annual rainfall isohyet.
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Prior research and development – WA Search and FloraSearch Stage 1 and 2 Development of a mallee industry in WA was commenced by CALM in 1992 with the objective to create a new large-scale industry based on a tree crop that would be profitable for farmers as well as being a major part of their capability to control salinity (Bartle and Reeves 1992). The mallee development was the motivation and model for the Search Project. It demonstrated that novel ‘shortcycle’ crop types might be feasible. This work reached the conclusion that any new crop large enough to provide land management benefits will be locked into bulk production of a relatively low-value commodity, with efficiency of production, security of supply and achievement of quality standards being the most important determinants of market success. This led to the Search project being undertaken with support of the National Heritage Trust in 1998 followed by the JVAP funded work in eastern Australia which commenced in 2002. FloraSearch Stage 1 (Bennell et al. 2008), which focused on eastern Australia, concluded in June 2004 having achieved its goals of: •
Selecting suitable target products such as pulp and paper, reconstituted fibreboard, bioenergy and fodder.
•
Identifying and commencing the testing of species with the potential to be productive in shortcycle crop systems, and to supply these industries within the FloraSearch region.
•
Developing a spatial analytical system suitable for regional analysis of current and potential industry based on these products and species.
The work being undertaken in eastern and western Australia was ultimately brought together under one project (FloraSearch Stage 2) supported by JVAP and the CRC - Plant Based Management of Dryland Salinity. This project provided an update and expansion of earlier FloraSearch work as the project evolved from an initial context and screening phase (Stage 1) to a more targeted and development phase (Stage 2). This then led into FloraSearch Stage 2, which reported in mid 2006 (Hobbs et al. 2008c) having completed its goals of: •
A systematic survey of the native woody perennial flora of southern Australia’s wheat-sheep zones, including selection and testing of species suitable for products identified in the FloraSearch stage 1 and WA Search project. This included establishment of a common database of attribute information of prospective native species for eastern and western nodes. Assessed the suitability of development species for cultivation and providing a short list of species with merit as commercial crops (development species) or the subject of domestication in the next phase including plant improvement (focus species). The current highest priority species (or “Focus Species”) include the fodder shrub Old Man Saltbush (Atriplex nummularia) for southern Australia, and Orange Wattle (Acacia saligna) for Western Australia. The next highest priority (or “Development Species”) included: Acacia decurrens; Acacia lasiocalyx; Acacia mearnsii; Acacia retinodes var. retinodes; Anthocercis littorea; Casuarina obesa; Codonocarpus cotinifolius; Eucalyptus cladocalyx; Eucalyptus globulus spp. bicostata; Eucalyptus horistes; Eucalyptus loxophleba ssp. lissophloia; Eucalyptus occidentalis; Eucalyptus ovata; Eucalyptus polybractea; Eucalyptus rudis; Eucalyptus viminalis ssp. cygnetensis and Viminaria juncea.
•
Further developing spatial analysis tools to consider opportunities at the regional scale for new large-scale industries based on products from woody perennial production systems. This work progressed, becoming a sophisticated tool able to support the systematic regional evaluation of
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perennial crop options. The analyses presented showed that many industries are profitable across vast regions of southern Australia. •
Establishment of field trials in WA, SA, Victoria and NSW to evaluate development species (a component of a collaborative CRC project).
It is the final stage (Stage 3) of this work being reported here and the report reflects major developments in project structure, emerging issues in dealing with climate variability and evolutions in some product areas. This report should be read in conjunction with the earlier FloraSearch Stage 1 and 2 project reports (Bennell et al. 2008, Hobbs and Bennell 2008, Hobbs 2008a, Hobbs et al. 2008c), WA Search (Olsen et al. 2004) and Acacia Search (Maslin and MacDonald 2004).
FloraSearch Stage 3 - Report Structure The FloraSearch Stage 3 report is presented in 3 sections (described below) due to the overall length of the material and to allow separation by topic to assist in ease of access to information by the reader. There have been several authors who have contributed to this report often with a focus on a particular aspect of the research or a particular regional view. To reflect this contribution the report sections are provided as chapters with the principal contributors nominated as authors.
FloraSearch 3a - Developing Species for Woody Biomass Crops This section describes the detailed evaluation and development of species identified in FloraSearch Stage 2. Data on the performance of development species from CRC evaluation trials, WA mallee plantings and other trials have been collated to provide up to date information on allometrics and productivities for key species. Species selected for ongoing development (focus species) have been the subject of comprehensive reviews and summaries of these reviews and the first stage result from plant improvement trial are reported.
FloraSearch 3b – Reviews of High Priority Species for Woody Biomass Crops Key focus species, Koojong or Orange Wattle (Acacia saligna), Oldman Saltbush (Atriplex nummularia) and Flooded Gum (Eucalyptus rudis) have been identified for plant improvement and further development. These species have been the subject of comprehensive species and domestication review and are reported in the FloraSearch 3b report.
FloraSearch 3c - Regional Industry Potential for Woody Biomass Crops This report concentrates on biomass industry development issues and approaches to help identify the spatial scale and economic potential of new woody biomass crops in the wheat-sheep zone of southern Australia. Feasibility investigations and development of markets has become a critical part of FloraSearch and related projects, and the need to analyse the scale and potential of existing and new industries that could utilise supply of feedstock from dryland production in the wheat/sheep belt is a key part of the project mix. The results of various approaches to market and business analysis by this and related projects are presented in this report. This report investigates the markets, economic drivers and spatial influences on developing commercial woody biomass crops in lower rainfall regions of southern Australia. This is done through surveillance of new markets and industries and detailed studies of production system economics and spatial modelling and analysis for a range of industries and regions. It focuses on Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia and explores bioenergy opportunities for electricity generation and creation of liquid biofuels to replace fossil fuel consumption in Australia. A region specific spatio-economic analysis Case Study 2: Woody Crop Potential in the Upper South East
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Region of South Australia identifies a region with significant potential for a wide range of woody crop industry types and investigates the feasibility of a range of industry types at high spatial resolution.
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2. Prioritisation of Regional Woody Crop Industries Trevor J. Hobbs1,2, John Bartle2,3, Michael Bennell1,2 and Brendan George2,4 1
Department of Water, Land and Biodiversity Conservation, Urrbrae SA 5064 Future Farm Industries Cooperative Research Centre, Crawley WA 6009 3 Department of Environment and Conservation, Bentley WA 6983 4 Department of Primary Industries, Tamworth NSW 2340 2
Drivers and Market Opportunities Key drivers for the development of new woody crops While the mitigation of dryland salinity using commercially-viable perennial plants was the primary NRM driver for our early work on developing new woody crops, the issue of climate change has recently added extra impetus. Woody crops can sequester carbon and create long-lived carbon pools in the form of soil carbon and plant biomass, both above and below ground. Furthermore, harvested biomass is a renewable resource, suitable for use as an industrial or bioenergy feedstock, which in economies with emission controls will not be subject to any carbon emissions penalty. The potential sale of sequestered carbon and the potential enhanced demand for emissions-free renewable feedstocks could provide an early extra revenue source for woody crops. This revenue accrues progressively improving the cash flow and profitability of woody crops. From the growers perspective carbon benefits might greatly exceed NRM benefits as a driver for adoption. Hence woody production systems can yield multiple benefits for landowners including economic diversification from new products (harvested biomass, carbon sequestration) together with social and environmental outcomes. Adaptable woody species selected through the species survey described in Stage 1 and 2 of the FloraSearch project (Bennell et al. 2008, Hobbs and Bennell 2008, Hobbs 2008a, Hobbs et al. 2008c) provide robust and reliable crop options in landscapes with variable soils and climates. The integration of perennial plants into our farming systems provides productive opportunities to buffer seasonal and annual variations in rainfall that cannot be reliably utilised by annual crops alone. By increasing the mix of functional plant types in the productive landscape we can improve risk management and long-term economic sustainability. Landscape and farm-scale benefits include decreasing recharge and thus the threat of salinisation, reducing wind erosion, and providing shelter for stock. Reforestation is also a means of restoring catchment water quality, the protection of land from salinity and erosion, the enhancement of remnant biodiversity, and opportunities for rural development.
Farm forestry industries for lower rainfall regions The competitiveness of conventional long cycle forestry is quite sharply confined by rainfall. There is potential to extend conventional forestry into lower rainfall regions, especially with some modification in site selection, species selection and planting design, but the long production cycle of these crops restricts their profitability to wetter areas peripheral to the main wheatbelt regions. In this region options based on species more tolerant of lower rainfall such as Sugar Gum are gaining some traction but scale is limited. Consequently, FloraSearch has focused on short production cycle woody crops that current economic analyses indicate could be viable across the wheatbelt. These would utilise new agroforestry systems and include short-cycle woody crops based on belts or blocks of coppice and phase crops. These crops will produce a large-scale commodity product having a low value per unit
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weight product and this has directed FloraSearch towards highly productive agroforestry systems and large-scale industrial approaches to product harvest and handling. Engagement with industries that market wood based products and can utilise this new source of feedstock is an important part of the project. The potential markets and products can best be considered in 3 broad categories: 1. Existing larger scale markets that are largely commodity based, e.g. pulp and export wood chip that are well developed and have been operating for a significant period; 2. Existing smaller scale and ‘niche’ markets that are generally developed but operate on a smaller scale; and 3. Emerging markets that are still developing with supply and demand channels not well established (e.g. carbon sequestration and biofuels). Forestry products are the largest user of woody feedstocks and early FloraSearch market evaluation considered this market to provide the most likely demand. Pulpwood production and composite board products have a huge demand for feedstock currently met from high rainfall forestry operations but opportunities exist to gain access to this market. Farm forestry could supplement existing supplies or provide resources to new mill developments. Options have recently broadened in scope, with products related to climate change mitigation and adaptation becoming more significant particularly as a significant amount of research and development funding is being invested to bring new technology online. The principles of producing heat, electricity and transport fuels from woody biomass are well known from early in the twentieth century and have returned to the forefront of industrial research as an alternative to fossil energy supply. Biomass as an alternative feedstock for energy and transport fuel production provides benefits in offsetting carbon release to the environment i.e. it is a renewable energy source and provides a positive multiplier of energy gained in the product over the energy that goes into producing it. Providing greater security for fuel supplies by reducing the dependence on offshore suppliers of raw materials is also considered to be strategically important, particularly in the USA. The availability of clean second-generation transport fuels is still constrained by the need to develop economically competitive industrial scale processes and this is the subject of huge investment, particularly in North America and Europe. It is forecast to be five to ten years before a large-scale industrial plant becomes available for diesel and ethanol production from woody biomass. Strong entrepreneurial interest, stimulated by the growing commitment to reduced carbon emissions restructuring of the energy sector, is emerging in large-scale processing of biomass from woody crops grown in the wheat/sheep agricultural regions of southern Australia. Carbon sequestration in farmforestry based projects and the substitution of fossil fuel emissions using biomass combustion provide a real and immediate opportunity to reduce net greenhouse gas emissions. Large scale planting of tree crops is already occurring in NSW where there is a legislative framework in place to support carbon cropping. Delivery contracts for carbon will have to be underpinned by solid science and auditable accounting procedures to ensure delivery. At this stage, the carbon sequestration potential of many species and woody crops productions systems are poorly understood. We need to identify the best species and options for dryland farming systems if they are to contribute to future carbon sequestration markets. Introduction of an Australian emissions trading scheme is likely in 2010, and is expected to allow carbon sequestration in trees and possibly agricultural soils, to be counted as an offset against fossil fuel emissions. Similarly, there will be a national renewable energy target of 20% by 2020 that will promote the adoption of alternative energy sources including those sourced from biomass. Recent factors in bioenergy development include: the successful conclusion of Verve Energy’s IWP (Integrated Wood Processing) demonstration in WA; investment by Willmott Forests in secondgeneration ethanol R&D in NSW and several developers looking in detail at the potential for exporting wood fuel pellets to Europe and Japan.
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Biosequestration thus forms a major component in both national and state climate change policies in reducing net greenhouse gas emissions. For landholders, carbon investment provides a very real prospect of financing revegetation to increase farm sustainability (Harper et al. 2007, Shea et al. 1998). Bioenergy from woody crop residues offer a direct means of reducing carbon dioxide levels and has been pursued in several projects including the Narrogin IWP plant (Enecon 2001) based on mallee residues. The potential of forage production from woody species has been highlighted during the FloraSearch project. The potential of shrub based forage systems is gaining acceptance as a means of providing options that Provide a feed base made up of a functional mixture of plant species including shrub options that: are resilient to prolonged dry periods and provide feed in periods of seasonal shortfall; integrate into a productive livestock enterprise based on current pasture options but are of a sufficient scale to have a positive impact on land management issues; and provide the opportunity to include a plant in a mixed assemblage that provide compounds of medicinal value, or compounds that have favourable effects on gut health.
Woody crop production systems Future research will provide improved plant production systems and in the future harvest methods to meet emerging markets. However, the question remains as to where to place these new systems in highly variable landscapes and how to optimise returns taking into account the land resource, existing land-uses and new crop options. Economic evaluation of new crop opportunities also requires reliable estimates of productivity (harvestable yield and carbon accumulation in plant biomass and soil profiles) and this will be related to regional and local variation in site conditions. Economic analysis needs to include all of the direct tangible costs and benefits discounted to present values over a long enough block of time to see whether large initial costs are exceeded by later revenues. This can be applied to alternative uses for the land in question such that the best option can be selected, thereby dealing with the issue of land opportunity cost. These scenarios can be evaluated using software tools, such as ‘Imagine’ (Abadi et al. 2005, Cooper et al. 2005) to explore optimal combinations of woody crops and annual cropping/grazing systems at the enterprise level. The challenge of optimising landowner returns whilst adopting new crop options is a fundamental issue. Through a better understanding of the optimal productive arrangement of annual and woody crops in a farming enterprise issues of competition with woody crop options can be avoided and reduce opportunity costs to existing landuses. It is crucial to compare economic returns of new systems with those from existing annual crops/pastures so that the most profitable option is applied at any point. Mallees are being extensively planted into belts through cropping areas particularly in WA. An investigation of the economics of belts in crop systems (Cooper et al. 2005) showed that for the mallee crop to break even with conventional annual plant agriculture belt designs would need to efficiently exploit lateral flows of surface and shallow surface water to achieve sufficient yield. However, we must be vigilant of the delicate balance between annual crop leakage of water that benefits neighbouring woody crop belts and the potential reduction in annual crop performance in areas adjacent to belts and windbreaks (Jones and Sudmeyer 2002, Bennell and Cleugh 2002, Cleugh 2003). There appears to be considerable potential to manipulate water sources and sinks to capture extra water to achieve a 20% yield increase. Lateral flows of shallow subsurface water can be captured by belts or on the surface by grade banks and diverted to belts or small block plantings.
Climate change and carbon sequestration On March 11, 2008 the Australian Government ratified Kyoto Protocol for greenhouse emissions and their commitment to the global greenhouse treaty becomes effective on June 9, 2008 (DCC 2008a). The Australian Government also delivered its ‘Initial Report’ under the Kyoto Protocol earlier than
8
required to the United Nations, which details how Australia intends to measure its emission reductions (DCC 2008b). A key part of this initial process is the development of a national carbon accounting system in measuring emissions from land use, land-use change and forestry. In February 2008 the Australian Prime Minister, Kevin Rudd, tabled in Parliament a report which projected Australian annual emissions at 559m tonnes over 2008-12, the equivalent of its Kyoto target of 108 per cent of 1990 levels, and that recent projections suggest that Australia would miss its Kyoto target by 5.5m tonnes due to the inactivity of the previous Coalition Australian government. Following the release of the May 2008 Federal Budget the Australia government announced $2.3 billion in funding to tackle climate change through initiatives across government over four years. This includes a $1 billion commitment to encourage solar hot water, solar panels and energy efficiency schemes, the introduction of household "green loans", and funding for a better access to Government environment initiatives. $260 million also has been allocated to Australian businesses to reduce their impact on the environment largely through the Clean Business Australia initiative (AusIndustry 2008). The Clean Business Australia initiative includes: •
A $75 million Re-Tooling for Climate Change competitive grants program, which will complement other measures by supporting Australian manufacturers to improve their production processes, reduce their energy use and cut carbon emissions.
•
A $90 million Green Building Fund, which will offer assistance for energy-efficient retro-fitting of existing buildings and support for training initiatives to improve the skills of building operators.
•
A $75 million Climate Ready competitive grants program, which will encourage Australian businesses to develop and commercialise products, processes and services that save energy and water, reduce pollution and use waste products in innovative ways.
Other budget initiatives include: •
$130.0 million to Australia’s Farming Future to deliver the Climate Change and Productivity Program, the Climate Change and Adaptation Partnerships Program, and the Climate Change Adjustment Program;
•
$15.5 million to administer the 20 per cent renewable energy target by 2020 - a target which is due to start increasing in 2009; and
•
$8.0 million for Australia’s forestry industry to better prepare for climate change by the development of a Forestry Adaptation Plan and an assessment of capacity for forests to sequester carbon.
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Table 1. Kyoto Accounting - Australian carbon dioxide equivalent emissions by sector in 2005.
Giga-grams (1,000 Tonnes)
Sector Total Kyoto
559074
Energy
391019
Fuel Combustion
359792
Fugitive Emissions From Fuels
31228
Industrial Processes
29463
Mineral Products
5641
Chemical Industry
938
Metal Production
12791
Consumption of Halocarbons and Sulphur Hexafluoride
4773
Other
5321
Solvent and Other Product Use
0
Other
0
Agriculture
87889
Enteric Fermentation
58678
Manure Management
3434
Rice Cultivation
216
Agricultural Soils
16558
Prescribed Burning of Savannas
8650
Field Burning of Agricultural Residues
352
Land Use, Land-Use Change and Forestry KP
33667
Afforestation and reforestation
-19609
Land use change (deforestation)
53276
Waste
17037
Solid Waste Disposal on Land
14742
Wastewater Handling
2266
Waste Incineration
28
Source: Australian Greenhouse Office (2008).
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Fig. 2. Kyoto Accounting - Net Australian carbon dioxide equivalent emissions since 1990. 600,000
Net Emissions - CO2-equiv. [Giga-grams (1000 tonnes)]
580,000
560,000
540,000
520,000
500,000
480,000 1989
1991
1993
1995
1997 1999 Year
2001
2003
2005
Source: Australian Greenhouse Office (2008).
The potential for carbon trading has become a significant factor in evaluating the economics of longterm perennial vegetation as permanent sinks but there is also increasing interest in the carbon stores held in harvested perennial crop systems such as classical forestry and other shorter rotation agroforestry crops. European emissions trading have been active since early 2005 and have since traded well over 2,000 million tonnes of CO2 equivalents (ECX 2008, Fig. 3). Current December 2008 ECX Futures (ECX 2008, 21/05/2008) are priced at €25.73/t CO2-e (Fig. 3). However, spot price trades (non-futures) values have been highly variable in recent years and was below €5.00/t CO2-e for all of 2007 with a strong rebound in April 2008 (ICE 2008). In Australia, the carbon trading market has yet to fully take off, but NSW has mandated carbon emissions controls and other state governments and private corporations are already gearing up for carbon trading. The NSW Greenhouse Gas Abatement Scheme (NGGAS) certificate price (NGAC) was A$11.50 per tCO2-e of greenhouse shortfall in July 2007. NSW government projections expect the price to raise to A$15.50 by 1 January 2013, however, spot price NGAC trades in the last 2 months have been stable at just under A$7.00 (NSW GGAS 2008). The National Emissions Trading Taskforce, a joint state and territory initiative to create an Australian emission trading schemes was particularly active in 2007 (then without Federal Government support). With change in Australia Federal Government in late 2007 the concept has now been adopted by the Australian Government. In early 2008, the Australian Prime Minister, Kevin Rudd confirmed the intent to establishing a national emissions trading scheme by 2010 in Australia (DCC 2008b) and setting a 20 per cent target for renewable energy use by 2020 to drive demand for use of renewable energy sources such as solar and wind. If future Australian emission trading values approximate those of the current European system it is likely that carbon sequestration with woody biomass or offset using renewable biomass energy will be economically viable for revegetation in some landscapes and regions Additionally, commercial woody crops may also include the average standing biomass of these crops as a carbon sequestration
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value, or even the long term carbon stored in the roots and accumulated soil carbon of these crops, as a contributor to the economic value of these perennial farming systems. Fig. 3. The European Carbon Exchange (ECX) settlement price and volumes in recent times. 14
€35 Dec08 Sett
12
€30
10
€25
8
€20
6
€15
4
€10
2
€5
0
€0
Price per tonne (EUR)
VOLUME (million tonnes CO2)
Total Volume
05 07 07 05 05 08 08 06 06 06 06 06 07 07 /20 7/20 0/20 1/20 4/20 6/20 9/20 2/20 3/20 6/20 8/20 1/20 2/20 5/20 4 /0 /0 /1 9/0 3/0 29/0 21/0 14/1 12/0 05/0 28/0 20/1 15/0 14/0 19 22 13
Source: ECX (2008).
Natural resource management The natural resources of lower rainfall regions of southern Australia provide the backbone of a diverse range of ecosystems, agricultural pursuits, industries and communities. However, many regions are significantly affected by the natural resource management issues of dryland salinity, soil stability and fertility, altered hydrological balances, water quality and ecosystem fragmentation or degradation. The loss of perennial vegetation cover has contributed substantially to these natural resource management issues and it is well recognised that there is a role for agroforestry, perennial farming systems and habitat re-creation to alleviate some of these problems. Woody crop industries can provide both environmental services and economic opportunities through the development of commercial revegetation in southern Australia. In Australia, approximately 57 million hectares of land are currently used for annual cropping and modified pastures and >200 million hectares of livestock grazing on semi-natural pastures (BRS 2004). There is huge potential for the greater use of sustainable and resilient woody biomass crops. Leakage of water from the current cropping/grazing farming systems contribute significantly to groundwater recharge in many areas. In some regions this recharge and rising water tables is undesired as it can promote salinisation processes. Plantations of woody crops on these landscapes would virtually eliminate recharge, greatly reduce the progression of dryland salinity, reduce wind erosion risk and provide additional biodiversity benefits. Additional benefits would also be gained from atmospheric carbon dioxide sequestration. The ability of woody crop system to sequester atmospheric carbon dioxide to help ameliorate this climate change driver is now being recognised widely in the community. There is currently strong international and Australian support to minimise atmospheric carbon dioxide and many emission and carbon trading schemes are being developed that support the use of perennial woody crops and revegetation for this purpose.
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FloraSearch investigates opportunities for a diverse range of woody biomass industries that can potentially service the region. Some industry types, such as fodder shrubs for livestock, pulpwood and firewood, already exist in the region and could be significantly expanded with little or no new investment in industrial infrastructure. New industries based on bioenergy and Eucalyptus oil or combined in an Integrated Tree Processing plant (e.g. Narrogin WA oil mallee plant) has strong potential in the region but may require significant investment in new infrastructure to proceed. Measurement and ranking of the intensity and impact of natural resource management issues that influence landscape and environmental health, and woody crop commercial viability can be used to identify which regions and districts would most benefit from investments in woody perennial crops.
Wood fibre industries The Australian Bureau of Agricultural and Resource Economics (ABARE) regularly produce summary statistics on the nature, volume and value of Australian wood production, imports and exports (ABARE 2004, 2007, 2008a). Australian forest industries consume around 21 million cubic metres of broad-leaved hardwood and coniferous softwood logs every year to produce lumber, paper products and panel products for Australian and export markets (see Fig. 4, Fig. 5, Table 2). Approximately 67% of this consumption is based on softwood coniferous forests (mainly Pinus spp.) with the remainder mainly based on hardwood Eucalyptus species. Additionally, the export of pulpwood chips consumes around 6 million tonnes of chips mainly from hardwood Eucalyptus species (4.9 million tonnes, see Fig. 6).
Focussing on the paper and paperboards, fibreboards and particleboards (part of the wood based panel products sector), and woodchip components of that data, we can provide an indication of the scale and value of those market sectors within the current Australian forestry industry. These markets provide opportunities for new industry development in low rainfall zones to supplement or expand capacity in existing industries and markets. The paper and paperboard manufacturing industries consume the largest share by value of wood fibre supply in Australia, followed by woodchip exports and secondary paper manufactures (e.g. boxes etc.). In 2006-07 Australian wood panels, paper and paperboard products consumed 3.0 million cubic metres of hardwood timber and 4.4 million cubic metres of softwood timber. Over the last 5 years the volume of hardwood logs consumed by Australian forest industries has grown by 55% and softwood logs by 9% (24% combined).
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Fig. 4. Historical volumes of roundwood harvested, consumed, exported and imported by forest industries in Australia (financial years ending 1961 to 2007). 30,000
Hardwood Removals Softwood Removals Consumption Total Exports Total Imports
20,000 15,000
Hardwood Removals
10,000 5,000
Softwood Removals 2005-06
2002-03
1999-00
1996-97
1993-94
1990-91
1987-88
1984-85
1981-82
1978-79
1975-76
1972-73
1969-70
1966-67
–5,000
1963-64
0 1960-61
Roundwood [’000 m³/year]
25,000
–10,000 Year –15,000 Source: ABARE 2007
Fig. 5. Volumes of forestry roundwood consumed by Australian industry product groups in recent years.
Roundwood consumed ['000 m³ / year]
25,000 Hardwood
20,000
Saw and veneer logs Wood based panel products Paper and paperboard
15,000
Other Softwood
Saw and veneer logs
10,000
Wood based panel products Paper and paperboard 5,000
Other
Year Source: ABARE 2008a
14
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
0
Source: ABARE (2007), Great Southern Ltd (2008)
15
Year
160
150
140
130
120
110
100 2000-01
1999-00
1998-99
1997-98
2008-09
2007-08
2006-07
2006-07
2005-06
2004-05
170
2005-06
180 2003-04
190
2004-05
200 2002-03
Hardwood Chips Softwood Chips
2003-04
Fig. 7. Australian hardwood and softwood export chip prices. 2001-02
Year
2002-03
2001-02
2000-01
1999-00
1998-99
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
Australian Woodchip Export [kt/year] 2,000
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
210
1990-91
220
1989-90
1988-89
Export Price [AU$/bdt fob]
Fig. 6. Australian hardwood and softwood export chip quantities. 6,000
5,000
4,000
3,000
Hardwood
1,000 Softwood
0
Table 2. Volumes of roundwood consumed by Australian forest industries in recent years. Roundwood consumed ['000 m³/year] Hardwood (broad-leaved) Saw and veneer logs Wood based panel products Paper and paperboard Other Total Softwood (coniferous) Saw and veneer logs Wood based panel products Paper and paperboard Other Total Hardwood and Softwood Saw and veneer logs Wood based panel products Paper and paperboard Other Total
2000-01 2001-02 2002-03 2003-04
2004-05 2005-06 2006-07
3734 18 2830 144 6726
3965 54 1551 171 5741
3920 19 1931 173 6043
4056 55 2720 193 7024
3998 63 3288 206 7555
3905 75 3139 208 7327
3519 114 2904 266 6803
8457 1023 2955 528 12963
9167 952 2771 415 13305
9713 1143 2879 377 14112
10071 990 3244 343 14648
10082 889 3420 347 14738
9686 1004 3243 415 14348
9177 890 3489 472 14028
12192 1042 5785 672 19691
13132 1006 4322 586 19046
13633 1162 4810 550 20155
14127 1045 5964 537 21673
14079 652 6708 553 21992
13591 1079 6383 623 21676
12696 1004 6393 738 20831
Sources: ABARE 2004, 2008a
Table 3. Australian production, trade and consumption of fibre/particle panel products in recent years. Volume [’000 m³/year] Production Particleboard Medium density fibreboard Total Imports Particleboard Hardboard Medium density fibreboard Softboard and other fibreboards Total Exports Particleboard Hardboard Medium density fibreboard Softboard and other fibreboards Total Consumption Particleboard Medium density fibreboard Total
2000-01 2001-02 2002-03 2003-04
2004-05 2005-06 2006-07
904 712 1617
965 732 1697
1025 786 1811
1048 795 1843
944 794 1738
1002 798 1800
933 680 1613
44 8 88 33 174
70 7 81 20 179
93 8 77 16 194
60 13 47 8 128
65 22 28 12 127
37 30 52 14 133
77 44 21 14 156
98 7 389 14 508
100 10 403 11 524
54 8 405 27 495
32 12 357 18 419
14 8 365 15 401
14 7 352 11 385
18 6 260 5 289
850 411 1262
935 411 1346
1063 458 1521
1077 485 1561
995 457 1453
1025 497 1522
992 441 1433
Source: ABARE 2007
16
Table 4. Australian production, trade and consumption of paper products, and woodchip exports in recent years. Quantity [kt/year]
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Newsprint
465.0
395.0
412.0
422.0
443.0
415.0
411.0
Printing and writing paper
554.0
624.0
564.0
585.0
659.0
663.0
676.0
Household and sanitary
204.0
198.0
194.0
200.0
197.0
217.0
204.0
Packaging and industrial paper
1449.0
1679.0
1892.0
1956.0
1945.0
1926.0
1901.0
Total
2672.0
2897.0
3061.0
3164.0
3244.0
3221.0
3192.0
Newsprint
283.9
224.2
273.3
303.5
314.0
324.5
262.5
Printing and writing paper
765.0
842.3
973.1
1101.9
1189.7
1140.1
1173.5
54.8
55.9
66.7
84.6
77.9
87.9
101.8
306.2
212.9
152.7
159.5
184.1
190.8
258.4
1409.8
1335.4
1465.8
1649.5
1765.7
1743.4
1796.2
2.6
12.2
3.5
0.7
1.7
0.2
0.2
Printing and writing paper
79.3
297.1
200.2
160.3
174.9
147.0
131.7
Household and sanitary
24.6
43.4
55.1
36.2
37.1
31.6
32.5
Packaging and industrial paper
390.4
384.7
483.5
596.8
568.7
632.2
640.5
Total
496.9
737.4
742.3
794.0
782.4
811.0
804.8
Hardwood (broad-leaved)
3893.7
3872.1
4442.3
4165.1
4493.9
4374.4
4880.4
Softwood (coniferous)
1100.4
848.6
994.8
1098.8
1104.5
989.0
1072.0
Total
4994.1
4720.7
5437.1
5263.9
5598.3
5363.4
5952.4
746.3
607.0
681.8
724.8
755.4
739.3
673.3
1239.7
1169.3
1336.9
1526.5
1673.8
1656.1
1717.8
234.2
210.5
205.6
248.4
237.8
273.4
273.3
Packaging and industrial paper
1364.8
1507.2
1561.2
1518.7
1560.5
1484.6
1519.0
Total
3584.9
3495.0
3784.5
4019.5
4227.3
4153.4
4183.4
Newsprint
38.4
30.9
34.3
36.1
37.1
35.7
32.0
Printing and writing paper
63.9
59.5
67.3
76.0
82.3
80.0
81.8
Household and sanitary
12.1
10.7
10.3
12.4
11.7
13.2
13.0
Packaging and industrial paper
70.3
76.7
78.6
75.6
76.7
71.7
72.3
184.7
177.9
190.4
200.1
207.8
200.6
199.1
Production
Imports
Household and sanitary Packaging and industrial paper Total Exports Newsprint
Woodchip Exports
Total consumption Newsprint Printing and writing paper Household and sanitary
Consumption per person [kg/year]
Total Source: ABARE 2007
17
Table 5. Value of wood product exports and imports in Australia in recent years. Exports Value [$m/year]
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Roundwood
66.84
89.14
106.86
113.66
72.56
82.36
117.38
Sawnwood
62.46
70.48
70.42
74.10
101.59
120.96
145.30
9.03
6.57
4.40
4.21
3.99
3.70
4.63
77.56
61.82
58.01
64.38
74.43
68.74
62.54
Veneer
8.56
8.87
7.53
8.30
6.02
6.53
5.80
Plywood
3.28
5.89
3.07
3.69
5.88
4.71
2.69
Particleboard
26.49
26.66
17.41
11.26
6.35
6.23
6.45
Hardboard
10.63
5.99
4.08
5.99
4.71
4.97
3.73
150.56
162.43
145.57
112.45
118.89
120.95
96.87
7.81
6.60
10.15
9.48
11.55
9.65
2.75
Paper and paperboard
459.31
612.92
630.16
634.89
626.86
601.08
650.50
Paper manufactures c
175.32
189.81
173.13
148.88
126.43
125.10
111.61
39.83
55.62
49.87
52.66
96.74
140.13
175.05
4.55
2.84
2.12
1.37
4.40
5.48
12.04
743.80
711.99
807.95
794.44
858.24
839.04
950.30
1846.04
2017.63
2090.74
2039.75
2118.66
2139.61
2347.62
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
0.92
0.71
1.75
1.12
1.03
0.41
0.60
427.67
442.51
504.68
501.89
492.03
419.38
418.38
0.00
0.00
0.00
0.10
0.00
0.00
0.00
461.51
528.05
589.31
583.48
586.09
527.57
567.85
Veneer
22.91
22.28
25.96
23.06
24.35
24.91
31.48
Plywood
65.75
81.90
114.30
113.03
128.56
133.58
167.03
Particleboard
13.77
18.74
21.51
17.19
24.45
13.68
26.19
5.52
7.06
5.97
10.68
18.83
27.35
35.16
34.73
31.73
29.39
22.90
14.99
21.62
12.08
9.71
8.25
8.92
3.45
4.92
7.08
7.15
2088.01
2029.77
2158.35
2136.70
2184.10
2187.03
2270.50
377.50
354.28
362.73
340.66
395.78
425.80
469.51
8.84
4.56
8.00
4.69
2.32
1.46
2.26
316.65
221.26
253.74
235.09
225.06
225.03
265.17
1.43
1.20
1.54
1.41
2.00
2.10
1.48
3834.91
3752.31
4086.17
3995.43
4104.50
4016.99
4274.84
Railway sleepers Miscellaneous forest products
Medium density fibreboard Softboard and other fibreboard
Wastepaper Pulp Woodchips Exports Total Imports Value [$m/year] Roundwood Sawnwood Railway sleepers Miscellaneous forest products
Hardboard Medium density fibreboard Softboard and other fibreboard Paper and paperboard Paper manufactures Wastepaper Pulp Pulpwood Imports Total Source: ABARE 2007
18
Energy Australia’s has significant resources of liquid petroleum, natural gas, coal and uranium and is a net energy exporter. Since 1986, it has been the world’s largest exporter of coal and in the last 9 years has emerged as one of the largest exporters of liquefied natural gas (LNG) and uranium. However, Australia is a net importer of liquid fuels, including crude oil and refined petroleum products, such as petrol, diesel and fuel oil. The value of Australia’s energy exports has grown by 5% annually since 1986 to around $38 billion in 2006-07; equally our energy imports have also grown in the same time and were worth $22 billion in 2006-07. Total domestic consumption of energy in Australia is consistently increasing and is expected to be 5,941 Petajoules for 2007-08 (see Fig. 8). Domestic energy consumption is dominated by coal for electricity generation and metal refineries. Liquid fuel industries also require significant amounts energy for petrochemical extraction, processing, refining and transport. The value of most energy commodity exports and imports is expected to rise over the medium term to longer term as demonstrated by recent record thermal coal (A$139/t) and crude oil prices (US$130/barrel = A$125/barrel, 22/05/2008) in recent months. Historically, firewood was a common source of fuel for many purposes, especially in household heating. It is still widely used for domestic heating but at lower levels than decades ago. In the last 10 years there have been significant improvements in wood fire heater efficiencies and pollution levels. We would expect the use of firewood will persist for warming homes, especially in rural and urban fringe areas, however, we can expect that firewood, briquettes and wood pellets will gain momentum and value as a replacement for expensive fossil fuels in the future. More detailed discussions of bioenergy prices and markets are given in Section 4 ‘Case Study 1: Woody Bioenergy Crops Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia’ of this report.
19
Fig. 8. Primary energy consumption across all energy sectors in Australia (1973 to 2007).
Australian Energy Consumption [PJ]
7000 6000 5000 4000 3000 2000 1000
1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
0
Year Source: ABARE (2008b).
Industrial carbon (coal, carbonised wood and charcoal) The refining of metal oxides requires carbon as a reducing agent. Coke, a derivative of coal, is currently the major source of carbon used for metal refining. The steel industry in Australia consumes around 4.2 million tonnes of black coal for this purpose (ACA 2006). Australian exports of metallurgical coal are significant, at around 132 million tonnes per year and at a price of $114/tonne in 2007. This rate has been increasing in recent years (Table 6). High demand for coking coal for steel production is likely to drive the price up further and some forecasts suggest the price will be approach $280/tonne in the near future. Table 6. Recent historical, and predicted, volumes and values of Australia metallurgical coal exports. Recent Years
Unit
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Volume
Mt
105.5
105.8
107.8
111.7
124.9
120.5
131.9
Value
A$m
7331
8688
7810
6671
10588
17003
15035
Unit value
A$/t
69.49
82.10
72.45
59.72
84.78
141.13
113.98
(Source: ABARE 2008)
The interest in the use of renewable sources of carbon for mineral processing is increasing. In Australia some mining companies have been exploring the potential of renewable carbon for metal refining. Coal is also used extensively in cement manufacture and uses about 0.9 million tonnes per year (ACA 2006). The current developed world traded market for wood charcoal is approximately 1 million tonnes/year (OMC 2006). Steam treatment of charcoal is used to create the highly valued activated carbon. The special property of activated carbon is its ability to preferentially absorb chemicals, ions and odours. A property
20
utilised widely for water treatment, gold recovery and in the food and beverage industries. The world market for activated carbon is around 700,000 tonnes/year (140,000 tonnes/year for water treatment alone) and is currently increasing by about 4-5% each year (OMC 2006). Australian markets for activated carbon (excluding gold refining) are approximately 3,000 tonnes/year and is conservatively worth an estimated $1,800/tonne. The metallurgical industry faces increasing pressure to reduce emissions of greenhouse gases (GHG) from production of metals. The substitution of fossil carbon by renewable carbon from biomass has the potential to radically reduce the net carbon emissions from metallurgical processes. The high reactivity and low sulphur content of charcoal makes it an attractive metallurgical reductant. The extent of substitution that is technically possible depends on the process. For example, in blast furnace iron making, perhaps 20% of the fossil carbon in coke could be replaced by renewable carbon as an injectant, due to the need to maintain a strong and coherent coke bed in the furnace. On the other hand, in new technologies such as bath smelting (e.g. HIsmelt) which use granular carbon rather than lump size high strength coke, potentially all of the fossil carbon could be replaced by renewable carbon. It may also be possible to substitute charcoal for coal in other processes such as synthetic rutile production in rotary kilns where high reactivity is beneficial and the strength of the carbon is less critical. This opens up a large potential range of markets for wood carbons as reductants. The economics of replacing coal by charcoal poses a significant challenge. Using a reported charcoal cost of A$435/t and a thermal coal price of A$100/t, it was estimated that the production cost of pig iron would increase by about A$234/t in completely changing from coal to charcoal, assuming that there were no significant increases in capital cost in making this change. This increase would represent an approximate doubling in the cost of pig iron. In order for charcoal to be competitive with coal the following potential advances would need to be developed: recognition of the value of carbon emission reduction and other potential environmental credits; development of more sophisticated charcoal production processes to utilize potential co-products such as bio-oil and waste heat; and the use of lower value woody biomass fractions for charcoal production. There is potential to greatly reduce the charcoal cost and to increase the reactivity of the charcoal by using the twig and leaf fraction of mallee biomass. This raw material at ~$10 green tonne could be readily converted to charcoal at $114/tonne.
Eucalyptus oil and other extractives Eucalyptus oil The increased cost of petrochemical-based solvents and adhesives resulting from sustained higher world oil prices, and the declining use of more carcinogenic adhesives and preservatives (eg. formaldehyde) used in composite wood manufacturing has resulted in an improvement of market potential and price of many biomass extractives in local and international sectors. ABARE (2004, 2008, see Table 7) reports on the high import and export value of wood and biomass extractives, and the stable demand for essential oils and the demonstrated increasing value trend of lacquers, gums and resins in Australian exports and imports. The reported world market consumes around 3000 tonnes/year of Eucalyptus oil (mainly cineole), which is mainly produced in China, Portugal and India (OMC 2006). However, Australian production is ~7% (200 tonnes) of the world’s production and is primarily destined for specialty fragrance markets. It appears there is a currently a high demand for oil volumes and production levels appear to be increasing. Good growing conditions in China in 2005 has put forecasts of Chinese Eucalyptus globulus oil production in 2006 at 4500 tonnes with an expectation of prices remaining stable (FDL 2006). The cineole component of Eucalyptus oil is well recognised for its degreasing and solvent properties. Large potential markets exist for this purpose after the implementation of measures to eliminate the use of the petrochemical based Trichloroethane, an ozone depleting chemical, during the
21
1990s. Other essential oils extracted from Eucalyptus leaves are very highly prized for their medicinal, antifouling and other properties which would attract premium prices in niche markets. In 2006, Eucalyptus globulus oil was valued at A$7.52/kg (George Uhe 2008; US$4.40/kg using US dollar exchange rate of 0.5850, RBA 29/03/2006), Eucalyptol (cineole 99.5%) at A$11.11/kg (US$6.50/kg) and Brazilian Eucalyptus citriodora oil at A$12.82/kg (US$7.50/kg). In February 2008, Eucalyptus globulus oil was valued at A$6.76/kg (George Uhe 2008; US$6.40/kg using US dollar exchange rate of 0.9466, RBA 29/02/2008), Eucalyptol (cineole 99.5%) at A$8.66/kg (US$8.20/kg) and Brazilian Eucalyptus citriodora oil at A$12.09/kg (US$11.45/kg). The local prices were notably influenced by international exchange rates. However, specialised Eucalypt oil lines, such as Australian blue mallee, (see Fig. 9) can attract significantly higher trade values. Other extractives There are probably many chemicals that might be commercially extracted from large volume biomass feedstocks. The FloraSearch project recognises the potential economic importance of additional revenue that might accrue from being able to extract an additional product. One class of chemicals has emerged in recent years that occur in the leaves of many species of Eucalyptus called formylated phloroglucinols compounds (FPCs). One such compound called sideroxylonal has been shown to have potent anti-fouling properties when applied to the hulls of ships. One of the main mallee species used in WA Eucalyptus loxophleba spp. lissophloia has been shown to have the highest recorded content of sideroxylonal. Sideroxylonal content is strongly correlated with eucalyptus oil content. It is not steam extractable and would need a separate process but it appears that such a step could be readily incorporated into an integrated process. Table 7. The value of extractives and other miscellaneous forest products. Miscellaneous forest products value [$’000]
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Lac, gums, resins etc
1901
2348
1148
1918
9800
5149
1780
Eucalypt oils
1981
2175
1783
2965
2024
2293
1967
638
533
398
73
23
62
186
Fuelwood
1853
23
20
2003
32
9
18
Wood charcoal
1342
2068
2070
2655
3470
3587
1967
6289
7998
8307
7288
10128
7977
9819
10839
10437
12750
11391
11066
10761
10111
251
151
97
87
34
100
87
65
75
79
40
69
28
54
354
276
287
590
806
681
1651
Exports
Rosins and wood tar
Imports Lac, gums and resins Essential oils Rosins and wood tar Fuel wood Wood charcoal Source: ABARE (2005a, 2007)
22
Eucalyptus globulus Oil
Eucalyptol (cineole 99%)
Eucalyptus citriodora Oil
Eucalyptus polybractea (blue mallee) Oil
14 12 10 8 6 4 2
Feb-08
Aug-07
Feb-07
Aug-06
Feb-06
Aug-05
Feb-05
Aug-04
Feb-04
Aug-03
Feb-03
Aug-02
Feb-02
Aug-01
Feb-01
0 Aug-00
World Eucalyptus oil prices [US$/kg]
Fig. 9. Trends in world market prices of Eucalyptus oils in recent years.
Date Source: George Uhe (2008)
Fodder industries There are several broad segments of Australian fodder industries, including on-farm meat production, on-farm wool production, feedlot production of meat and livestock feed manufactures. All these segments required a primary resource of livestock fodder, which is presently based on predominantly annual crops of pasture and cereals. However, some herbaceous perennial plant species (predominantly lucerne) are widely utilised, and highly valued, for their provision of green feed or nutritious hay for dry season fodder in the paddock or as a feedlot resource. On-farm meat and wool Gross value of Australian farm production for livestock slaughtering and production was approximately $17.8 billion dollars in 2004-05 (MLA 2006), based on herds of 102.7 million sheep and lambs, and 27.7 million cattle and calves. The Australian red meat market has strengthened in recent years. The strong demand has generally driven up livestock and meat prices (Fig. 10). The number of sheep currently shorn for wool in Australia (106 million head in 2004-2005, AWI 2006) has decreased by around 32% since 2000-01 (140 million head). Australian Wool Innovation forecasts the 2005-06 shearings will be approximately 106 million head producing around 456 million kilograms of greasy wool. An offset to the lower production values in recent years has been the increasing proportion of production of higher value low micron fine wools.
23
Fig. 10. The average sale value per head of prime lambs and cattle in Australia in recent years.
800 Prime lamb
Cattle sales (incl. live export)
700
Price per head [$]
600 500 400 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year Source: ABARE (2007)
Australian feedlots and stockfeed manufacturers The Australian Lot Feeders’ Association reported (ALFA 2008) that the turn-off of lotfed cattle for 2007 was a record 2.40 million head. The feedlot holding of cattle in December 2007 was around 584,500 head (Fig. 11), at 51% of total capacity (1.15 million head). The stockfeed manufacturing industry utilises a wide range of agricultural resources, including cereal grains, legume grains, oil seeds, protein meals, cereal milling co-products, hays and other fibre sources, to produces a variety of meals, fibres, supplementary pellets, ration and finishing pellets. Australia’s annual consumption of manufactured stockfeed has doubled since 2003 (4.95 million tonnes) to about 10 million tonnes in 2005 (SFMCA 2006). The greatest consumption by volume of manufactured stockfeed is in the dairy (27.2%), poultry (27.1%), feedlot beef (24.6%) and pig (16.4%) industries. The demand and prices of these products is closely tied to local and export livestock markets.
24
Fig. 11. The number of head of livestock held in feedlots for the December period over recent years by state.
1,000,000 900,000 800,000 Number of head
700,000 WA SA Vic NSW Qld
600,000 500,000 400,000 300,000 200,000 100,000 0 2002
2003
2004
2005
2006
2007
Year Source: ALFA 2008
Perennial shrub fodder sources Lucerne is highly nutritious and widely used forage in southern Australian livestock industries. It is a relatively adaptable species suited to a variety of climates and soil types in Australia. Even with extensive breeding and selection programs lasting many years it still fails to perform as a dryland crop in some areas, especially in lower rainfall regions (=60 green tonnes per ha, the harvest cost = $15.00/green tonne; if standing biomass < 60 green tonnes per ha, the harvest cost = 680.77*standing biomass-0.9362
Transport horizon
75km (equates to mean haulage distance of 54.94 km)
Transport cost
Fixed cost of $2.50 per green tonne, plus $0.07 per green tonne per km
Delivered biomass price
Bone dry wood = $90/tonne Bone dry leaf = $112.60/tonne (8% oil at $1.20/kg; 92% residue at $18/kg) Bone dry residue (twig and bark) = $18/tonne
Land occupied
Mallee belt width = 5 meters Unplanted zone width = 2.5m No Yield Zone width: A function of years since establishment or harvest First harvest: No Yield Zone Width = 0.55*(sapling age-1) Coppice harvests: No Yield Zone Width = 1.1*(coppice age-1)
Variable cost of crop or pasture establishment
$140.00 per hectare per year
1. This is the mean transport distance for rectilinear transport within a 75km horizon, assuming the amount of mallee planted per unit land area is constant for all transport annuli. 2. The mallee belt zone is defined as being 5 meters wide, which approximates the projected canopy area of the mallees. The unplanted zone is 2.5m each side of the belt. The equivalent no yield zone is an additional 1.1m either side of the belt beyond the unplanted zone. The variable cost of planting and growing an annual crop or pasture is assumed to be $140/ha per annum. The unplanted zone incurs an annual weed control cost of $36/ha per annum.
The mallee biomass yield at first harvest was based on actual growth data collected across multiple sites by the authors. The proportion of each biomass component in the total above ground biomass was modelled as a function of standing above ground biomass. The linear functions in Fig. 15 relating dry wood and leaf biomass to standing green biomass were used in the adapted Imagine model to estimate the biomass composition of the standing biomass at first harvest. For standing green biomass increasing above 100 tonnes/ha, it was assumed that the dry large wood proportion and dry leaf proportion plateau respectively at 60% and 15% of total above ground dry biomass; based on individual tree composition data (Fig. 18). Subtraction of these values from the standing biomass, after adjusting for moisture content, enabled determination of the twig and bark proportion. In the absence
47
of data for coppice, these functions were also used to estimate the value of the standing coppice biomass.
70%
Proportion of above ground dry biomass that is leaf (%)
Proportion of above ground dry biomass that is wood (%)
Fig. 18. The proportion of standing dry biomass which is wood and leaf against standing green biomass, for 82 individual trees. 60% 50% 40% 30% 20% 10% 0% 0
50
100
150
200
Above ground tree biomass (kg)
40% 35% 30% 25% 20% 15% 10% 5% 0% 0
50
100
150
200
Above ground tree biomass (kg)
The baseline delivered price received for dry wood, twig and bark, and leaf fractions in this analysis were $90.00/tonne, $18.00/tonne and $112.60/tonne respectively. These values are indicative of prices obtainable for products derivable from the different biomass components. Dry wood has potential to be used to make panel products, such as MDF or particleboard, or charcoal products. The dry leaf fraction contains ~8% cineole, which could provide a return to the grower in the order of $1200/tonne as an industrial solvent. The leaf residue (post oil extraction), twig and bark fractions are anticipated to have relatively low value utility as a feed stock for conversion into electricity or biofuels. By aggregating the value of the wood, leaf and bark and twig components and adjusting for moisture content, a value for total green biomass was derived. This value was directly related to biomass yields and harvest costs in the adapted Imagine model. For the production system envisaged, comminuted green whole tree biomass is the form in which biomass would be delivered to a processing facility. For these reasons, green total biomass was used to represent the value of the biomass produced by farmers. Competition penalties imposed by mallee belts on adjacent crops and pastures was captured by modelling the no yield zone width as a linear function of mallee age since establishment or harvest. The function was designed to equate with the mean annual no yield zone width of 1.1m used by Cooper et al. 2005 in their base case scenario. Based on observations of mallee growth, the function generates a width of competitive influence for a given tree age in the order of 1-2 tree heights from the tree stump line. Although derived using a highly simplified approach, this width of influence range is comparable to field measurements (Sudmeyer et al. 2002, Sudmeyer et al. 2004). Under the base case, the mallee production system required a coppice MAI of 10.8 dry tonnes per hectare per year (total above ground biomass) to give a net present value of zero from the area of displaced agriculture. To provide an equivalent annual return of $66.80 per hectare per year, an estimate of the opportunity cost of displacing annual crops and pastures, a coppice MAI of 19.9 dry tonnes per hectare per year was required (Fig. 19). Note that this MAI refers to biomass production from the belt zone (5m width) and not the total effective area occupied by the mallees in the farming system. For observed mallee biomass growth rates in the order of 7 dry tonnes per hectare per year for a harvest cycle, the effective area occupied by the mallee belt generates an annual loss of $47.60 per hectare per year.
48
Fig. 19. The Base Case Scenario – EAR of a mallee production system against coppice growth rates (expressed as mean annual growth increment in dry tonnes of above ground biomass per year) for base case assumptions.
EAR ($/effective hectare)
$200 Base case EAR from Agriculture
$150 $100 $50
19.9 ; $66.8
$0 10.8 ; $0
7 ; -$47.6
-$50 -$100 -$150 0
5
10
15
20
25
30
Coppice MAI (dry tonnes/ha/yr)
Sensitivities The base case scenario provides the platform for exploring the sensitivity of mallee system profitability to variation in a range of parameters. The EAR of the modelled mallee production system was highly sensitive to delivered coppice growth rates and delivered biomass price (Fig. 20). Other important parameters included harvest costs, establishment costs and the level of competition between mallees and adjacent crops and pastures (Fig. 21 to Fig. 23). Note that the sensitivity to establishment cost was independent of growth rates; this was not the case for the other parameters reported here. The relative importance of yield and revenue parameters was compared by determining the percentage change in each parameter (relative to the base case) required for the mallee production system to give an EAR of $66.80 per hectare per year (Table 15). The relative importance of cost parameters was compared by testing the effect of eliminating the cost on the EAR generated by the mallee production system (Table 16).
49
Fig. 20. Sensitivity to delivered biomass price.
EAR ($/effective hectare)
$250 Base case
$200
Biomass Price -30% Biomass Price +30%
$150
EAR from Agriculture
$100 $50 $0 -$50 -$100 -$150 0
5
10
15
20
25
30
25
30
Coppice MAI (Dry tonnes/ha/yr) Fig. 21. Sensitivity to harvest cost. Base case
EAR ($/effective hectare)
$150
harvest cost extra $3/gt harvest cost extra $6/gt
$100
EAR from Agriculture
$50 $0 -$50 -$100 -$150 0
5
10
15
20
Coppice MAI (Dry tonnes/ha/yr)
50
Fig. 22. Sensitivity to establishment cost. Base case
$200 EAR ($/effective hectare)
Establishment cost -50% No establishment cost
$150
EAR from Agriculture
$100 $50 $0 -$50 -$100 -$150 0
5
10
15
20
25
30
25
30
Coppice MAI (Dry tonnes/ha/yr) Fig. 23. Sensitivity to no yield zone width. Base case
$250 EAR ($/effective hectare)
NYZwidth = 0m
$200
NYZwidth = 2.2m EAR from Agriculture
$150 $100 $50 $0 -$50 -$100 -$150 0
5
10
15
20
Coppice MAI (Dry tonnes/ha/yr)
51
Table 15. Percentage change in production/revenue parameter values required for the mallee production system to provide an EAR of $66.80/hectare (from land where agricultural production is displaced). Parameter
Base Case Value
Percentage Increase required
Coppice MAI
7 dt/ha/yr
181%
Overall delivered biomass price
$38.87/green tonne
66%
Dry Wood Price
$90/dry tonne
138%
Leaf Oil Price
$1.20/kg
184%
Residue Price
$18/dry tonne
404%
Table 16. The effect of reducing cost parameter values to zero on mallee production system EAR (from land where agricultural production is displaced). Parameter
Base Case Value
EAR ($/ha) if cost parameter = 0 (Base Case = -$47.60/ha)
Harvest Cost
A function of standing biomass
$42.54
Establishment Cost
$1334/hectare
$2.55
Transport cost
$2.50/green tonne plus $0.07 per green tonne per km
-$19.31
Discount Rate
7%
-$23.52
NYZ width
1.1 meters
-$26.82
Scenarios The sensitivity analysis showed that improvements to any single cost or revenue parameter alone are unlikely to allow mallee to be competitive with existing agriculture. Instead, improvements are required across all facets of the production system. A number of scenarios were developed to explore how mallee profitability could be improved on multiple fronts.
Scenario 1: Higher value product options from leaf and residue fractions The residue fraction (twig, bark and post distillation leaf matter) is a sizable component of the total above ground biomass. Higher value may be obtainable from this fraction by developing new biomass processing technologies and product options. A number of emerging products have potential to be made from mallee biomass: including metallurgical charcoal (Langberg et al. 2006), densified fuel pellets and pyrolysis fuels (Polagye 2005). It is possible that some or all of these product options could support a delivered biomass price for biomass growers greater than that used in the base case scenario. Due to it being a large component of the standing biomass, even a modest increase in the value of the residue fraction can increased the EAR from the mallee production system significantly. Doubling the value of the residue (to $36 per dry tonne) increased the mallee EAR from -$47.60/hectare to $19/hectare under remaining base case assumptions. Setting the delivered value of the residue to a similar amount to the wood and leaf fractions (~$90/dry tonne) increased the mallee EAR to $66.00/hectare. The current value of eucalyptus oil is in the order of AUS $10/kg delivered to the market; however the world market is limited in size. The base case return to the grower used in this analysis was $1.20/kg, which is an estimate for a long term competitive price assuming penetration into larger scale commodity markets such as industrial solvents. However, in the medium term higher prices are likely
52
to be obtainable as production gradually expands. Doubling the delivered price to $2.40/kg increased the mallee EAR from -$47 to $15 under remaining base case assumptions. If the delivered price was increased to $3.60/kg then the mallee EAR increased to $77 under base case assumptions.
Scenario 2: Manipulation of coppice cycle length For a give suite of product opportunities, the profitability of the mallee production system could be improved by manipulating coppice cycle length. Within the 20 year analysis period, five different coppice cycle lengths were tested to examine the effect on mallee profitability. These were 2, 3, 4, 5 or 6 coppice harvests over the 20 year project life; equating to 2.5, 3, 3.75, 5 and 7.5 years between harvests respectively. Note that 5 coppice harvests on a 3 year cycle was the base case scenario. All other base case assumptions were maintained. There was a complex interaction of factors affecting mallee profitability under different coppice length cycles. Shorter cycles were penalized by higher harvest costs, particularly in the low MAI range. Longer cycles had the advantage of a greater wood proportion in the standing biomass at harvest, which corresponded with higher overall biomass value. However, longer cycles were penalised by increased competition losses in adjacent crops and pastures and greater discounting of harvest returns. Where coppice was in the MAI range of 5-10 dry tonnes per hectare per year, a coppice cycle length of 3.75 years (corresponding to 4 coppice harvests during the 20 year project life) gave a slight improvement over the base case. At a coppice MAI of 7, the mallee EAR for 4 harvests was $41.14/ha compared with -$47.60 for the base case scenario. For coppice MAI between 10 and 15 dry tonnes per hectare per year a coppice cycle length of 3 years (the base case) was optimal. The sensitivity of mallee EAR to the value of the wood and leaf fractions was also tested for coppice cycle lengths of either 3 or 7.5 years. Mallee EAR was more sensitive to the price of the wood fraction compared with the leaf fraction and this effect was exacerbated as coppice MAI increased and coppice cycle length increased. This was due to contribution of wood to overall biomass value exceeding that of leaf, particularly for higher standing biomass values.
Scenario 3: Environmental services payments The base case scenario did not include valuation of environmental services provided by mallee such as carbon sequestration, erosion control, biodiversity protection and/or salinity abatement. For a given parameter set, the difference between the Net Present Value (NPV) from the mallee land use and the NPV from annual crops and pastures allowed the determination of an annuity payment for environmental services required for a mallee production system to break even with existing agriculture. Under the base case scenario, an environmental services annuity payment of $114.60/ha/yr was required for the mallee system to provide an EAR equivalent to agricultural return of $66.80 per hectare per year. Farmers are unlikely to value environmental services this highly under current farm business settings (Bathgate and Pannell, 2002, Pannell et al. 2006). Some level of external valuation, for example an environmental stewardship payment, which enables environmental services to provide a direct contribution to farm profits will be required for these services to contribute to the competitiveness of mallee production systems. Carbon sequestration is a service provided by mallee with a high likelihood of becoming valued in Australian farm businesses in the near future. This is the result of policy evolution in response to the threat of climate change due to anthropogenic carbon emissions. Unlike annual crops and pastures, the mallee production system is capable of developing a permanent store of carbon in the below ground biomass. Assuming a below ground storage rate of 2-4 tonnes CO2 equiv per year; equating to approximately 30% of above ground biomass production; and a carbon price of $10/tonne CO2 equiv the mallee system could generate an additional annual return of $40/ha. In practice, it is difficult to predict the likely price of carbon if emissions reduction policies are implemented in Australia. However,
53
under the base case assumptions used this study, the value of carbon required to make the mallee production system competitive with existing agriculture is substantially higher than reported carbon trading prices in the established European market (Flugge and Abadi, 2006). The scope for market valuation of other environmental services payments, such as erosion control, salinity abatement and biodiversity protection, is less tangible. There appears to be growing interest in developing markets for environmental services around the world; however the design of effective schemes is complex and challenging (Salzman, 2005). Particular difficulties relate to achieving equity in the valuation of services provided by individual farms, without creating market distortions which either create unnecessary costs or reduce effective service provision. In an environmental stewardship scheme recognising service provide by perennial crop plants, it will be important for farmers to receive service payments in timeframes that are meaningful to their business and personal goals (Pannell et al. 2006). In Western Australia a number of State and Federal nature conservation initiatives already provide financial incentives payments for farm revegetation; particularly where revegetation is linked to the protection of high value nature conservation assets (Munro and Moore, 2005). These “up front” payments have the effect of partially or fully offsetting establishment costs for mallee belts.
Scenario 4: Reduced establishment costs It may be possible to reduce establishment costs through a combination of technological improvement and wider plant spacing. The cost of nursery grown seedlings is a substantial component of mallee establishment costs; with unit costs typically in the range of 25-35c per seedling. At the standard planting density of 2667 stems per belt hectare (2 rows occupying a 5m wide belt with seedlings spaced at 1.5m along the rows) and a seedling price of 27.5 cents, the base case scenario seedling cost equates to $733 per hectare. Technologies to reduce establishment costs include direct sowing methods, which avoid the nursery component, or cheaper nursery production methods. The major challenge for direct sowing is to overcome risk factors for seed germination and early seedling growth which are controlled or negated in the nursery environment: these include erratic rainfall, inconsistent sowing depth, environmental extremes such as frost, weed competition and mortality due to pests and diseases. Important strategies for reducing nursery costs include achieving greater economies of scale and producing smaller seedlings over a shorter period before transplanting into the field. The Joint Venture Agroforestry program (JVAP), a consortium of national R&D Corporations, is actively exploring these lower cost establishment pathways (G Woodall, Centre for Excellence in Natural Resource Management, pers. comm. 2007). Quantitative date on the growth response of mallee under different planting densities is not available. However, little relationship between planting density and standing plot biomass was observed in 210 plots across 12 sites measured by the authors (Fig. 24). Care must be taken is extrapolating from these observations; given that the plots span a range of age classes, soil types, establishment success rates and management histories. The response of different planting densities to coppicing treatments is also unknown. However, it appears to be plausible that mallee planting density could be reduced from 2667 stems per hectare without compromising biomass production
54
Fig. 24. Plot biomass1 against standing stem density for 5-9 year old plots of E. loxophleba ssp. lissophloia in Western Australia (n=210).
Plot Biomass (green tonnes/hectare)
160 140 120 100 80 60 40 20 0 0
1000
2000
3000
4000
Stems per hectare 1.
Plot biomass assuming mallee belt occupies a 5m wide zone.
Scenario 5: System improvement on multiple fronts Scenarios 1-4 show that marginal gains in any one of the development areas described will not be sufficient to make mallee highly competitive with current agriculture. However, combining these strategies into a “packaged” solution may provide enough overall improvement for mallee to be a viable perennial crop. This is demonstrated conceptually in Fig. 25, where relative to the base case scenario: 1. The interval between coppice harvests is increased from 3 to 3.75 years. 2. Coppice yield is increased from 7 to 9 MAI. 3. Establishment costs are reduced by 25%. 4. A carbon sequestration annuity of $40 per hectare per year is achieved. 5. The value of the residual biomass (twig, bark and spent leaf) is doubled. 6. The value of the leaf biomass is increased by 50%. For many of the mallee production system parameters, such as growth rates and establishment costs, there are environmental and/or technical constraints to increasing revenues or reducing costs. As such, this analysis highlights the importance of achieving the highest possible price for mallee biomass in order to improve overall system performance.
55
Fig. 25. Cumulative improvement in mallee production system profitability, where gains are made across a suite of production parameters.
$100
$60 $40
+ leaf oil $1.80/kg
+ residue $36/dry t
+ carbon annuity $40/ha/yr
-$60
+ estab. cost $898/ha
-$40
+ coppice MAI=9
-$20
4 coppice cycles
$0
base case
$20 EAR agriculture
EAR ($/effective hectare)
$80
Discussion In order for perennial revegetation to make a meaningful contribution to landscape sustainability, substantial displacement of existing annual crops and pastures will be required. The profitability of perennial options will be a crucial determinant of the level of adoption by farmers (Pannell et al. 2006). This study has attempted to provide insights into the profitability of mallee belts integrated into low rainfall, broad acre farming systems. The results indicate that for observed levels of mallee biomass productivity and projected returns for mallee biomass, adoption of mallee at a significant scale is unlikely without improvements in mallee production system performance on multiple fronts. Based on sensitivity and scenario analysis, a number of strategies exist to improve the economic competitiveness of the mallee crops. It is suggested that future research and development of the mallee production systems is structured around these strategies, which include: •
Maximise the price paid for delivered mallee biomass. Optimal bio-processing models which utilize and add value to all biomass components require development. Many biomass processing technologies exist, however the next phase of development requires their commercialization and combination into an integrated “biorefinery package”. The demonstration scale Integrated Wood Processing plant at Narrogin Western Australia, developed by the State Government owned energy generation company Verve Energy, represents the most developed example of such a system for mallee so far (Verve Energy, 2007). This demonstration plant successfully produced electricity, eucalyptus oil and activated carbon from mallee biomass; however system integration issues remain a challenge. Future system design will need to ensure that biomass production is well interfaced with systems of processing and product manufacture. Parameters of particular importance include the size of the overall biomass resource and the composition of delivered biomass. Similarly, the supply chain needs to be designed to be highly complementary with processor feed-stock requirements. Innovation in developing new and existing markets for mallee derived products is another key requirement.
56
•
Improve biomass yields. Yield improvement can be achieved by several means. Firstly, site types with the least constraints to mallee productivity can be targeted. Favourable site attributes include deep profiles amenable to root exploration and relatively high soil water holding capacity (ref). A criterion for site selection would also include sites with relatively low returns from conventional agriculture. Deep sandy soils, at risk of wind erosion, could be an example of a site type with high suitability for mallee belts. Secondly, selection and breeding improvement programs can improve the genetic potential for rapid growth and improved biomass quality for product derivation. Significant biomass productivity gains have been achieved from breeding programs for other forestry species (ref). Thirdly, active interventions to capture the agricultural water surplus can be implemented. The direction and capture of surface water flows onto mallee belts, using systems of shallow contour banks, is an example of a relatively simple water harvesting system.
•
Reduce establishment costs. Some level of cost reduction should be achievable through a combination of technological and agronomic improvements. Government policies which offset establishment costs are currently important and warrant further scrutiny to determine their cost effectiveness in contributing to environmental benefits.
•
Reduce harvest costs. The harvest system is critical for the economic competitiveness of mallee production systems. It is clear that the development of the low cost, conceptual continuous flow harvesting system used in this study is a vital development requirement. Existing harvesting technologies, using conventional forestry equipment, are substantially more costly and therefore not viable.
•
Develop environmental service payments. It will be important for the mallee industry to be well positioned to benefit from environmental services payments, which may become available in the future. Research to quantify these benefits is therefore a priority. Determination of carbon sequestration capacity of mallee belts, particularly in the below ground biomass, is likely to contribute to an additional revenue stream in the near future. Studies to enable monetary valuation of wind erosion reduction, dryland salinity abatement and biodiversity protection services provided by mallees may also be valuable. However, expenditure on research into these areas must be balanced against the likelihood that they will be able to contribute to grower profits under future settings.
The economic model used in this study has some important limitations which should be addressed by future refinements. These include: •
Biomass growth and utility: Variation in biomass partitioning as the mallees grow under a repeated harvesting regime has implications for the ease and cost harvesting, biomass utility and biomass value. Growth curves for mallee coppice are currently not well understood. The assumption of linear MAI curves in this analysis is an oversimplification and may bias the findings by making shorter harvest cycles appear more favourable. Key areas of current research include: 1. Understanding patterns of growth through time and under different management regimes, in particular the season and frequency of harvesting. This includes the dynamics of biomass partitioning as plants age and the effect of nutrient cycling and depletion on coppice growth. 2. Understanding the effect of biomass production and supply chain systems on the utility of the biomass, including system losses. What proportion of the above ground biomass can be comminuted into wood chips, which are a relatively high value product and have a strong effect on breakeven yields and delivered prices? Can the assumption of a minimum dimension of >17mm diameter inside bark be validated? With respect to leaf oil products, how will movement through the supply chain affect oil volatilization and loss from the system?
57
•
Competition with adjacent crops and pastures: Competition effects have been poorly quantified in the field but have been shown to be highly important in the economic model. More research is needed to better understand this area for regularly harvested mallee, particularly in relation to seasonal effects. Competition could be expected to be less for mallee harvested on a shorter harvest frequency. The advantage of shorter cycles over longer cycles will be exacerbated substantially if this is the case. High levels of variation between sites and across seasons, as has been observed in other studies, are likely to make the incorporation of these effects into economic models complex (Oliver et al. 2005).
•
Whole of farm economic analysis: The gross margin analysis method used in this study is indicative of the profitability of converting a broad acre cropping paddock into an alley farming system. However, whole farm budgeting analysis is required to quantify the effect of this type of land use change on the overall farming business. Whole farm modelling would also better enable management and risk management implications of adopting mallee belts to be explored. For example, the protection of young coppice from grazing damage is likely to necessitate modifications to grazing management across the farm.
Although the development of mallee into a commercially competitive crop remains highly challenging, the prospect is real. The findings of this study are intended to help guide the targeting and prioritisation of resources for developing mallee as a crop for the western Australian wheatbelt. The premise of this work is that profitability will be the critical determinant of widespread adoption by farmers. Engagement with potential biomass processors to ensure biomass production, supply chain and processing activities are well coordinated is an important task for industry developers; given the sensitivity of on farm profitability to delivered biomass price.
58
4. Case Study 1: Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia Trevor J. Hobbs1,2, Michael Bennell1,2, Craig Neumann1,2, Brendan George2,3 and John Bartle2,4 1
Department of Water, Land and Biodiversity Conservation, Urrbrae SA 5064 Future Farm Industries Cooperative Research Centre, Crawley WA 6009 3 Department of Primary Industries, Tamworth NSW 2340 4 Department of Environment and Conservation, Bentley WA 6983 2
Introduction FloraSearch and the WA Search reports (Hobbs et al. 2008c, Bennell et al. 2008, Olsen et al. 2004) identified the most prospective industry types for the wheat-sheep zone of southern Australia. They identify the high priority or “best bet” industries and detail some emerging industries that may be serviced by woody crop production in the mid-low rainfall areas of Australia. Bioenergy markets for electricity generation, liquid fuels, fuel pellets and integrated tree processing for multiple products are emerging from a world environment of higher fossil fuel costs, climate change, environmental awareness and advances in technology. Governments around the world are encouraging the production and consumption of renewable energies to reduce greenhouse gas emissions in response to the threat of climate change; to strengthen national energy security; and to promote better community health. Mitigation of climate change has stimulated huge investment into the use of renewable fuels as one method of reducing carbon emissions. There is a range of research projects underway around the world to develop new bioenergy technologies and improve existing technologies. Burning biomass as an energy source returns to the atmosphere the CO2 that was absorbed by the plants and there is not net release of CO2 if the cycle is sustained. Fossil energy is consumed in producing bioenergy but the energy used is usually a small fraction of the energy produced. When producing liquid bioenergy more input energy is required but roughly 4-5 times the output energy is produced per unit input. The replacement of fossil fuel used represents a significant reduction in CO2 additions to the atmosphere. New industrial process development is a lengthy and expensive step-by-step process usually following the steps below: •
Bench scale plant in the laboratory and used for small trial runs
•
Larger plant in laboratory working continuously
•
Pilot plant adjacent to the laboratory
•
Demonstration scale plant
•
First commercial plant
•
Second commercial plant, which incorporates lessons learned from the first commercial scale plant.
59
It is quite common for this sequence to take ten years or longer. The viability of these new industries is also dependant on the provision of consistent and continuous supplies of woody biomass feedstocks. In the initial stages of developing these new industries some difficulties and risks may stem from infant primary productions systems, harvest technologies and supply chains. Initially benefits may be gained from utilising biomass derived from annual biomass crops and conventional annual crop or forestry waste streams prior to the establishment of consistent woody biomass crop supplies for these new energy industries.
Energy Demands in Australia Australia consumes around 5500 Petajoules (1 PJ = 1015 joules) of energy ever year across our industrial, mining, agricultural, commercial and residential sectors (see Fig. 26). Approximately 900PJ of energy is used to generate electricity (see Table 18). In Australia electricity generation is predominantly based on black and brown coal deposits with current ABARE (2005b) forecasts expecting this heavy reliance on coal resources to continue. Our major coal resources, used to generate electricity, are widely variable in their inherent energy values largely due to their variable moisture and carbon contents (see Table 19, Table 20). The value of thermal coals for both domestic and export markets have increased by at least 12% in recent years (see Table 21, ABARE 2005b).
9000 8000 7000 6000 5000 4000 3000 2000 1000 2029-30
2025-26
2021-22
2017-18
2013-14
2009-10
2005-06
2001-02
1997-98
1993-94
1989-90
1985-86
1981-82
1977-78
0 1973-74
Australian Energy Consumption [PJ]
Fig. 26. Primary energy consumption across all energy sectors in Australia since 1973-74.
Year Source: ABARE 2008
21.3 million people currently live in Australia (May 2008) and we consume and export vast amounts of energy through the combustion of coal, oil and natural gas for heat and electrical energy, and export large quantities of coal every year (see Table 17). In Australia we are large consumers of electrical energy, not just for our households and offices but also from a variety of mining and manufacturing industries. Our national maximum instantaneous electricity generation capacity is 47 Gigawatts (Department of Resources, Energy and Tourism, 2008) and this equates to 220 kilowatts per person. The cost of generating this power is increasing and dramatically since 2005-06 (Fig. 27).
60
As part of Australia’s response to global warming, the federal Government initiated the Mandatory Renewable Energy Target (MRET) in April 2001 (DCC 2008c). This target required the generation of 9,500 gigawatt (GW) hours of extra renewable electricity per year by 2010. This equates to residential energy requirements of 4 million Australians. Recently, the Federal Government has committed to increase the Mandatory Renewable Energy Target five-fold from 9500GWh to 45000 GWh by 2020. Renewable Energy Certificate (REC) prices have increased strongly since the beginning of the year reaching more than $53, well above expected values (see Fig. 28). Other policy commitments are on their way at both state and federal level that will have an impact on future supply / demand for RECs. Bioenergy production could reduce or stabilise the contribution of energy markets to global warming through the use of renewable crops that potentially could result in a carbon neutral energy system. Power plants fuelled by biomass could conceivably contribute 1,000 megawatts (MW) of Australia’s electricity generating capacity to replace an equivalent electricity production capacity from coal-fired power plants. This level of displacement, if achieved, would lead to a fall of about 7.4 million tonnes a year in net carbon dioxide emissions. Biofuels such as ethanol can also be used to replace petrol or diesel powered vehicles, similarly reducing net carbon dioxide emissions. Fig. 27. Cost of electrical energy in Australia in recent years. 70 NSW 60
QLD SA
$/MWh
50
VIC
40
30
20
10
0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 Financial Year Source: NEMMCO (2008)
61
Fig. 28. Modelled expected prices for Renewable Energy Certificates in Australia.
Source: Intelligent Energy Systems (2002)
Thermal coal The spot price for Newcastle thermal coal averaged US$66/t in 2007 and has recently reached as high as US$140/t in February 2008 (ABARE 2008, Steelguru 2008). Contract prices for thermal coal exported to Japan for 2007-08 were settled at US$55.50/t. However, ABARE (2008) indicate that current demand and supply issues will substantially raise contract prices in 2008-09. In the mediumterm (2008-2013) global thermal coal imports are expected to increase by 2.7% per annum to about 790 million tonnes with Australia providing approximately 21% of this commodity. These expected increased are dominated by continued growth in Asian electricity generation and consumption. Table 17. Recent and projected production and export of thermal coal in Australia. Australia
Unit
2006
2007
2008f
2009f
2010f
2011f
2012f
2013f
production
Mt
174.2
181.1
179.6
191.4
199.3
211
230.7
237.1
volume
Mt
110.8
111.6
107.7
119
129.5
146.6
160
168
value*
A$m
7623
6947
8142
14235
15112
16361
15999
15046
exports
f
ABARE forecast; *In 2007-08 dollars, Source: ABARE (2008)
62
Fig. 29. World recent and projected global import volumes of thermal coal.
Global Thermal Coal Imports [Mt]
900 Asia Europe Other
800 700 600 500 400 300 200 100 0
2006
2007
2008
2009
2010
2011
2012
2013
Year
(Source: ABARE 2008)
Table 18. Recent and projected electricity generation by fuel type in Australia. 2004-05
2009-10
2014-15
2019-20
2029-30
[PJ]
[PJ]
[PJ]
[PJ]
[PJ]
Black coal
469
513
578
640
757
Brown coal
187
199
211
226
256
Oil
11
11
12
13
15
Gas
128
157
184
221
321
Total thermal
796
880
985
1101
1349
Hydro
58
61
61
62
65
Wind
5.5
13.5
20.9
21.7
28.4
Biomass
3.3
5.4
7.4
11.2
23.1
Biogas
2.1
4.7
5.2
5.8
7.7
Total renewables
69
85
94
101
124
Electricity generation, by fuel Thermal
Renewables
Source: ABARE 2005b
63
Table 19. Energy content of major solid fuels in Australia. Type by Location
GJ/t
GJ/t
Black coal
Black Coal (cont)
New South Wales
Western Australia
Exports
Steaming coal
19.7
- coking coal
29.0
Tasmania
- steaming coal
27.0
Steaming coal
Electricity generation
23.4
Steelworks
30.0
Brown Coal / Lignite
Washed steaming coal
27.0
Victorian brown coal
9.8
Unwashed steaming coal
23.9
South Australia
15.2
Brown coal briquettes
22.1
Queensland
22.8
Exports Coking coal
30.0
Other
Steaming coal
27.0
Coke
27.0
Electricity generation
23.4
Wood (dry)
16.2
Other
23.0
Bagasse
9.6
Source: ABARE 2005b
Table 20. The calorific value and carbon content of major southern Australian coal resources.
Carbon Content #1 [%dry weight]
Moisture Content #2 [%fresh weight]
Gross Calorific Value [GJ/fresh weight t]
25.1
69.5
26.0
20.0
Black Coal (Hunter Valley NSW)
25.6
63.2
3.3
24.7
Black Coal (Liddle NSW)
20.7
50.6
3.3
20.0
Black Coal (Mt Piper NSW)
27.5
67.3
3.2
26.6
Brown Coal (Gippsland Vic)
26.4
67.5
60.6
10.4
Brown Coal (Leigh Creek SA)
21.2
54.3
31.0
15.1
Coal Type and Location
Gross Calorific Value #1 [GJ/dry t]
Black Coal (Collie WA)
Sources: CSIRO Biofuels Database 2006, DEH 2005.
Table 21. Recent historical, and predicted, volumes and values of Australia thermal coal exports. Recent Years
Unit
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Mt
106.7
106.4
109.0
124.7
128.5
130.5
131.7
Value
A$m
4481
6337
6860
6954
6472
6038
5609
Unit value
A$/t
42.00
59.55
62.90
56.40
50.40
46.30
42.60
Volume
Source: ABARE 2005b
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Results from detailed destructive sampling of Eucalyptus (mainly mallees) and Acacia species in the wheat-sheep zone of South Australia provides us with information on biomass fractions and fresh weight water content of hardwood species (Hobbs and Bennell 2005). The average moisture content of whole 10 year old plants is 39% (range 34-44%), with no significant difference between Eucalypt and Acacia species. The average dry biomass ratio by weight of Stemwood: Twigs: Leaf and Fine Twigs was found to be 38:31:31. The average gross calorific value of fresh weight biomass from Australian hardwood species is greater than some coal deposits used to generate electricity in Australia (see Table 22, Table 20). Many current coal powered generation plants can readily accept 5% plant biomass blended with coal with no requirement for engineering modifications. Higher proportions of plant biomass are likely to require only minimal engineering changes in generation facilities. Table 22. The calorific value and carbon content of selected Australian hardwood species.
Carbon Content #1 [%dry weight]
Moisture Content #2 [%fresh weight]
Gross Calorific Value [GJ/fresh weight t]
19.1
49.4
39.0
11.5
Atriplex nummularia
16.8
42.3
39.0
9.2
Corymbia maculate
19.1
48.7
39.0
11.4
Eucalyptus camaldulensis
19.4
49.5
39.0
11.8
Eucalyptus cladocalyx
19.0
49.0
39.0
11.4
Eucalyptus cneorifolia
19.9
49.9
39.0
12.3
Eucalyptus globulus
19.2
49.1
39.0
11.6
Eucalyptus grandis
18.8
48.8
39.0
11.2
Eucalyptus horistes
20.0
49.0
39.0
12.4
Eucalyptus occidentalis
19.0
49.3
39.0
11.4
Eucalyptus sideroxylon
19.9
50.9
39.0
12.3
Eucalyptus polybractea
19.7
48.7
39.0
12.1
Melaleuca uncifolia
20.9
52.0
39.0
13.3
Average Eucalypt/Acacia
19.4
49.3
39.0
11.8
Black Coal (avg. of Table 20)
24.7
62.7
9.0
22.8
Brown Coal (avg. of Table 20)
23.8
60.9
45.8
12.8
Gross Calorific Value #1 [GJ/dry t]
Acacia saligna
Species
Sources: #1CSIRO Biofuels Database 2006; #2Average moisture content of whole native plants (estimated for species) Hobbs and Bennell 2005.
Transport Fuels The world price of oil has escalated from around US$25 in 2001 to over US$60/barrel in 2006 and is currently in excess of $100 /barrel (EIA 2008). West Texas Intermediate (WTI) crude oil spot prices increased from $101 to $120 per barrel over the first 3 weeks of April 2008 as supply disruptions in Nigeria and the North Sea and continuing strong demand growth in the emerging market countries pressured oil markets. WTI crude oil prices, which averaged $72 per barrel in 2007, are projected to average $110 per barrel in 2008 and $103 per barrel in 2009 (Energy Information Administration USA). Earlier reports of the viability of biomass the liquid fuel technology could now be viewed as out of date as a consequence of these dramatic changes. For example, Enecon (2002), using information
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provided by the Centre for International Economics, concluded that ‘the prospect for the next 15 years at least is for declining rather than increasing crude oil prices.’ They used a crude oil price of $22/barrel in their assessment of the comparative costs of ethanol, methanol (manufactured from woody feedstocks) and petrol, projected for the year 2015. The Biofuels Taskforce (2005) has reported to the Prime Minister on status, potential and issues of biofuels development and adoption in Australia. This report draws upon ABARE analyses of the viability of ethanol and biodiesel in the current policy and market environment. ABARE’s models are based on assumed oil price of US$32/barrel and an US$/A$ exchange rate of 0.65. They also state, “Should the long-term oil price be higher, all other things being equal, the commercial viability prospects of biofuels would improve.” They conclude, based on an US$/A$ exchange rate of 0.65, that ethanol producers would remain viable beyond 2015 with a oil price of US$42-47/barrel with out government assistance, and biodiesel producers would require an oil price of US$52-62/barrel to remain viable without assistance. Fig. 30. Indicative world oil prices (West Texas Intermediate) in recent years. 100
Crude Oil Price US$/barrel
90
80
70
60
50
Apr-08
Feb-08
Dec-07
Oct-07
Aug-07
Jun-07
Apr-07
Feb-07
Dec-06
Oct-06
Aug-06
Jun-06
Apr-06
Feb-06
Dec-05
Oct-05
Aug-05
Jun-05
Apr-05
40
Source: EIA (2008)
Liquid Biofuels In our earlier FloraSearch reports ethanol and biodiesel production from woody biomass was identified as two potential industries for Australia (FloraSearch 1 and 2, Bennell et al. 2008, Hobbs et al. 2008c). At the time two factors downgraded the priority of these industry types: 1/ the relatively low price of mineral oil based fuels; and 2/ the infant stage of the technology required to convert woody biomass to ethanol or biodiesel. In recent years we have seen changes in both of these areas. The technologies of converting woody biomass to produce ethanol have also progressed in the last two years. Globally, there has been significant investment and progress in lignocellulosic ethanol technologies for bio-fuels. In the USA a large increase in ethanol as a motor fuel is expected because of 2 policy initiatives: a $USA 0.51 tax credit per gallon of ethanol used as motor fuel and a new mandate for up to 7.5 billion gallon of ‘renewable fuel’ to be used as a petrol supplement by 2012.
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(Farrell et al. 2006) this project demand is increasing the likelihood that lignocellulosic biomass (wood and agricultural residue) will become an important feedstock for the production of bio-fuel. These materials typically comprise of cellulose (40 - 60 %), hemicellulose (20 - 40 %) and lignin (10 - 25%) that will be a residue and can be used as a fuel for energy production (Hamelinck et al. 2003). Lignocellulosic biomass can be converted to ethanol by hydrolysis where the cellulosic part is converted to sugars and subsequent fermentation converts these sugars to ethanol. To increase to yield of hydrolysis a pre-treatment step softens the biomass and breaks down cell structure to a large extent. There are several options for pre-treatment and hydrolysis but current technological development is focused on enzymic hydrolysis which requires very mild process conditions, while giving good yield, lower capital investment and less environmental risk. This technology is relatively immature requiring an expected 10 years before being industrially adopted but is provides the possibility for significant improvements in production costs. Biodiesel production is mostly derived from oilseed plants such as canola, tallow (animal fat) and used cooking oil. New technologies to create biodiesel from woody feedstock using pyrolysis is not yet commercially viable in Australia, however, significant research is currently underway to develop a practical ‘Second Generation’ technologies for this purpose.
Bioethanol production in Australia Biofuel ethanol in Australia is currently produced by fermenting plant products such as sugar, molasses and cereals. Two ethanol plants with combined production capacity of 152 megalitres (ML) are currently operating in Australia. By the end of this year it is expected that 4 ethanol plants will be operating in Australia, with a combined production capacity of just under 270 ML. Currently planned projects could also produce an additional 500 ML by the end of 2010. The use of ethanol for transport fuel is growing rapidly in Australia where it is typically blended at 10% (E10) with petrol and is now available at more than 600 service stations across the country. If 25% of Australia vehicles used E10 the total Australian market for fuel ethanol would be ~6,500 ML and save more than A$5 billion worth of petrol imports. Globally, ethanol makes up no more than 2% of all transport fuel, but total consumption in 2007 was 45–50,000 million litres (ML), with Brazil and the United States consuming 80% of the world total and growing at ~15% per year (BAA 2008). Global fuel ethanol sales are growing much faster than petrol sales. Blends vary from as little as 5% (E5) to pure (100%) ethanol, but the most common blends are E10, E22, and E85. The European Commission targets to replace 10% of its transport fuels with renewable ethanol and biodiesel by 2020 (European Commission 1997). Current fermentation or ‘First Generation’ ethanol production competes with food resources such as cereals and sugars used for human consumption. Future demands for ethanol are likely to be met by new ‘Second Generation’ technologies (eg. ‘lignocellulosic’ conversion to ethanol). Willmott Forests Limited recently announced they intend to invest in 3 year, $20 million project designed to commercialise a new patented fuel ethanol production process through their subsidiary Ethanol Technologies Limited (Ethtec, 2008). They intend to develop technologies to convert fibrous biomass to ethanol and generate surplus electricity from combustion of the lignin co-product. The intended process consists of 4 parts: 1/Hydrolysis of woody biomass using concentrated sulphuric acid, extruder and tube reactor treatments to produce sugars; 2/ Lignin separation from sugars and acid recovery, lignin for combustion/energy; 3/ Fermentation of the pentose and hexose sugars to ethanol; and 4 /Ethanol recovery using potassium carbonate, and water recycling. Their feasibility studies have concluded that fuel ethanol produced by the Ethtec process will have a crude oil equivalent cost in the range of US$36-50 per barrel and is highly competitive with the current crude oil prices. The pilot plant is situated at the NSW Sugar Milling Co-Operative Harwood Mill and Refinery in Northern NSW and will use pine forest wastes and bagasse.
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Biodiesel production in Australia In January 2008, there were 10 biodiesel plants with combined production capacity of just under 560 megalitres (ML). Only 4 of these plants are currently operating to produce approximately 85 ML of biodiesel from tallow and used cooking oil (BAA 2008). With increasing feedstock prices the industry is investigating alternative oil sources. Transesterification of vegetable oils and animal fats can produce a biodiesel with similar properties to petrodiesel and suitable for use in most diesel engines. Although the biodiesel derived from vegetable oils, animal fats, used cooking oil, oilseeds (e.g. canola, sunflower) and palm oil can be used in most diesel engine it often retails as a blend with petrodiesel. Australia’s capacity to replace petrodiesel with locally-produced biodiesel could increase to 10–40% with the development of ‘Second Generation’ technologies and the adoption of alternate biomass feedstocks. In 2007, Australia consumed around 60 million litres (ML) of biodiesel but this only represents~0.4% of diesel fuel used for road transport (BAA 2008). Australian mining companies and transport fleets are trialling B20 blends and biodiesel is increasing becoming available at many service stations across the country. Europe accounts for more than 80% of global biodiesel consumption where sales have grown to around 5 billion litres and the European Commission targets to replace 10% of its transport fuels with renewable fuels by 2020 (European Commission 1997). China also targets 15% replacement of petrodiesel by 2020. The use of biodiesel in the United States for transportation and heating oil has also grown rapidly in recent years following petrochemical security and pricing issues in the world. Greenhouse gas emissions in response to the threat of climate change, energy security and crude oil price are all drivers of this change towards renewable liquid fuels.
Woody Biomass to Refined Energy Technologies A number of technologies are emerging and being developed for converting woody biomass to liquid fuels. Recently Enecon Pty Ltd completed a study of bioenergy technologies and opportunities for the Avon Catchment region in WA. Enecon (2007) provides a more detailed description of major technology pathways being developed to produce liquid fuels. The following section provides a summary of these technologies based on those reported by Enecon (2007).
Pyrolysis Pyrolysis involves the heating of biomass in the absence oxygen to prevent burning. Heat is not produced so external heating of the biomass is required to break down the biomass into solid, liquid and gaseous fractions. The temperature, time for heating and other variables determine whether the pyrolysis action produces predominately charcoal solids (typically via slow processes) or bio oil liquids (typically via fast pyrolysis). For successful fast pyrolysis the biomass feed requires some preparation: •
Grounding into small particles that allows the particles to heat rapidly when they are introduced onto the pyrolysis reactor and facilitates the conversion to large percentages of oil.
•
Drying to contain around 10% moisture or less. Moisture in the biomass feed carries through the process and dilutes the oil that is produced.
Fast pyrolysis largely converts woody material into liquid bio oil with charcoal as a secondary product. The fast pyrolysis process as commercialised by Canadian company Dynamotive (2008) heats wood feed to almost 500ºC in approximately one second, and typically converts two thirds of the biomass feed into liquid bio oil. The construction of such a plant is expected to cost between $40 and $50 million dollars depending on the extent of facilities, location and site works required. As more full-scale pyrolysis plants are built and operated over coming years, these costs are expected to reduce.
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Slow pyrolysis operates with different temperatures and achieves a different product mix to fast pyrolysis. Notable in Australia is the pyrolysis technology being developed by BEST Energies in New South Wales. A demonstration scale plant is operational in NSW and the focus of this plant is to process biomass for charcoal and syngas rather than the maximisation of liquid products as targeted in fast pyrolysis processes. Bio oil is quite different to biodiesel produced from tallow, palm oil or other oilseed crops. The two liquids have different feedstocks, production processes and chemical compositions. Bio oil cannot currently be used in vehicle engines, although research is underway at Monash University and in Europe and the USA to resolve this. Bio oil can be used as a fuel for heating or steam generation or as a fuel for power generation in gas turbines. Bio oil cannot be produced at a cost that will make it competitive with Australian coal or natural gas, which are among the cheapest fossil fuels in the world. However it does have a number of immediate applications that may be commercially competitive on a case-by-case basis: •
For supply of electricity at remote locations as a replacement for diesel generators
•
For supply of heat in locations that do not have access to natural gas
•
As a replacement for heating oil
There is considerable interest in pyrolysis charcoal for a variety of product markets: •
Stationary energy - It has been considered as a renewable feed component for coal-fired power stations.
•
Metallurgical charcoal - The CSIRO has examined the use of wood charcoals as a reductant in various metallurgical industries.
•
Industrial fuel - It is technically feasible to use charcoal as a renewable fuel. For mallee feed at a cost of $30 per tonne, such a pyrolysis plant could produce liquid fuel at a cost roughly comparable with current prices for LPG, heating oils and diesel. A sustained price increase for crude oil will improve the competitive position for bio oil.
•
Soil improvement - Adding carbon to soils via charcoal (“agrichar”) appears to have multiple benefits. The carbon is sequestered (with the possibility that carbon sequestration payments may be included in future trading regimes). Also the carbon is reported to enhance the yields of plants grown in the improved soils.
•
Activated carbon - As with many other charcoal materials, it should be possible to make activated carbon from pyrolysis charcoal. This could be achieved via steam activation or acid activation.
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Other products from pyrolysis include: •
Food flavourings - Fast pyrolysis is already used in North America for the production of chemicals e.g. production of smoke flavourings for food.
•
Resin chemicals - A number of research groups around the world have demonstrated that bio oil can be used in the manufacture of resins. The phenolic materials present in the lignin can replace other materials currently used in phenol formaldehyde and similar resins. These resins are widely used for engineering wood products (including plywood and oriented strand board) and have other industrial applications.
Biomass to transport fuel Biomasses to Liquid (BtL) fuels are at an early commercialisation stage of development. BtL involves the gasification of biomass into mainly hydrogen and carbon monoxide (called “syngas”), followed by a synthesis step to produce a range of alternative fuels, most notably methanol, dimethyl ether, and synthetic diesel. Gasification is a high temperature process, which operates in an oxygen-starved environment. Choren in Germany is undertaking the most commercially advanced work. A large scale BtL synthetic diesel plant is currently under construction, and this is expected to be followed by construction of the first commercial scale plant (sized to use one million tonnes dry biomass per year as feed supply) in Germany towards the end of this decade. Choren is sizing its commercial plants to achieve the economies of scale possible with large industrial facilities. Product cost would currently be more expensive than conventional liquid transport fuels, but with further technology development and suitable feedstock price BtL is a good prospect for the future, probably within a decade. A variety of liquid transportation fuels can by synthesised using thermo-chemical conversion of woody biomass. Examples of such fuels are: •
Methanol
•
Dimethyl ether (DME)
•
Synthetic diesel fuel created via the Fischer-Tropsch process.
Methanol is an established chemical commodity that is currently produced around the world from natural gas and coal. It has well-established international markets and provides the feedstock for the manufacture of several bulk chemicals such as formaldehyde. Methanol is not currently a major transportation fuel, but has been identified as a suitable fuel for use in future fuel cell vehicles. DME is an extremely clean burning fuel, with physical properties very similar to LPG. It is used in a number of chemical processes but at this stage it is still regarded as an experimental fuel, with motor vehicle companies such as Volvo trialing its use. Fischer Tropsch synthesis of fuels and chemicals is well established from fossil fuels most notably coal. Fischer Tropsch diesel may be used as a direct substitute for diesel, as this fuel meets the specifications for petroleum diesel. BtL fuel is produced in a two-step process. The first step involves preparation of synthesis gas (a mixture of carbon monoxide and hydrogen) from a biomass feedstock and conversion of the synthesis gas into liquid fuel via chemical processing involving catalyst beds. Biomass gasification is a relatively well-developed technology, with some large-scale gasifiers having operated for close to two decades. Such an example is the Lahti gasifier in Finland, which has gasified biomass for cocombustion with coal. The synthesis process involves passing the gas over catalytic beds tailored for the end product fuel. The gasification process can use a variety of biomass types within compositional
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constraints, as the objective is to transform the biomass into carbon monoxide and hydrogen. BtL plants are invariably required for technical and economical reasons to be large industrial facilities. Biomass would be treated to remove dirt, dry it to the required moisture level, and obtain the required biomass particle size specifications. Oil mallee biomass would in principle be a suitable fuel. Hamelinck et al. (2003) modelled Biomass Integrated Gasification Fischer Tropsch plants and determined the investment cost of a 367 MW input BIG-FT system to cost in the range $280-450 million US dollars (2004), depending on configuration. Hamelinck calculated that in the short term, the production cost of F-T diesel would be US$15/GJ, and in the longer term with technology refinement, could reduce to US$10/GJ. Assuming a lower heating value of 43.5 GJ/tonne and a density of 780 kg per cubic metre (actual values from the Güssing plant), the near term production cost would be US 50.9 cents per litre. This cost estimate assumes a biomass cost of US$2/GJ from dry biomass, which equates to approximately US$40 per dry tonne or approximately or A$30 per green tonne (in 2008). BtL is one of the more prospective bioenergy technologies on the horizon able to produce liquid fuels that will fit into the existing liquid fuel markets. The synthesis pathway to make gasified wood into liquid fuels can also be used with gasified coal, or a syngas from natural gas itself. There is already a significant industry worldwide that uses natural gas to make chemicals/fuels such as methanol this way.
Biomass to ethanol Wood contains significant quantities of sugar that may be converted to ethanol, provided these sugars are first “released” from the wood and made available for fermentation. It is also possible to break the wood into small molecules (“syngas”) via gasification, and then rebuild those molecules into ethanol via chemical synthesis. These different technologies have been broadly understood for many years but have never moved past the pilot or demonstration stage. This may change over the next few years, as earlier in 2007 the US government announced significant funding support for six commercial scale biomass to ethanol plants to be built in the USA. This work is largely a result of the “US Biofuels Initiative” which aims to make cellulosic ethanol cost competitive with gasoline by 2012 and to replace 30 percent of current levels of gasoline consumption with biofuels by 2030. The total investment on these projects over the next five years could exceed A$1 billion. In less than ten years it should be possible to engage with companies offering proven biomass to ethanol technology for the construction and operation of biomass to ethanol plants. A full-scale biomass to ethanol plant is expected to use more than half a million tonnes of green biomass each year. A number of alternative process pathways are available to turn woody biomass into ethanol (Abengoa Bioenergy 2008). They all have three main stages: •
Pre-treatment of the biomass to make it amenable for further processing
•
Break the wood down into components, via hydrolysis or via gasification
•
Reform those components into ethanol, via fermentation or catalytic synthesis.
Hydrolysis breaks wood into its basic sugars. The cellulose and hemicellulose components of wood are essentially long, molecular chains of sugar. They are protected by the lignin in the wood that binds the biomass together. So-called C6 or hexose sugars are associated with the cellulose. C5 or pentose sugars are associated with the hemicellulose. Conventional yeast is adapted to C6 sugars, but the fermentation of pentose sugars to ethanol requires yeasts that are genetically adapted or different micro-organisms altogether. These technologies include 2 form of hydrolysis:
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Acid Hydrolysis - Acids can be used to break cellulose and hemicellulose into their component sugars. Enzyme Hydrolysis - Hydrolysis can also be achieved using enzymes (Iogen Bioenergy 2008). The enzymes need to be specifically matched to the biomass feedstocks and the biomass needs to be more homogeneous than for acid hydrolysis. In recent years there has been a dramatic fall in the cost of enzymes, with the US National Renewable Energy Laboratory reporting a thirty fold reduction in enzyme costs. Apart from the well-developed fermentation processes new technologies are being developed for ethanol production. These include: •
Gasification and Reforming where synthesis gas from the thermal gasification of biomass can be chemically processed using catalysts to produce ethanol. The reforming process eliminates the need for micro-organisms to produce the ethanol, which is instead produced via chemical processing.
•
Gasification and Fermentation - a novel fermentation process that can convert carbon monoxide and hydrogen (biomass gasification) into ethanol. The organism consumes carbon monoxide, carbon dioxide, and hydrogen to produce ethanol and acetic acid. Preliminary calculations would indicate that ethanol yields of 375-400 litres per tonne of wood could result.
With the financial support being provided by the US government ethanol from biomass appears to be better placed now than ever before for a move from technical feasibility to commercial operation. If work in the USA goes according to plan there will be commercial scale examples of biomass to ethanol in operation in a few years, although it will take several more years before the lessons learnt from the operation of these initial plants are used to design and build additional plants. A reliable, commercial scale biomass to ethanol technology may be achieved within ten years. Pilot projects are being developed in Australia. Ethanol Technologies Limited (Ethtec), a Willmott Forests Limited company, has announced that work has begun on a three-year AU$20 million project designed to commercialise a new patented fuel ethanol production process (Ethtec 2008). The technology converts fibrous biomass to ethanol and generates surplus electricity from combustion of the lignin co-product. The individual processes to be brought online at the new plant include: •
Hydrolysis: concentrated sulphuric acid treatment of woody biomass feedstock.
•
Lignin separation and acid recovery: separation of the lignin and the acid from the sugars, recycling of the acid for continuous production and recovery of the lignin for combustion to provide process energy.
•
Fermentation: simultaneous fermentation of the pentose and hexose sugars to ethanol using newly developed micro-organisms.
•
Ethanol recovery: from the fermentation broth by induced phase separation using potassium carbonate, simultaneously treating and recycling the water to production.
Feasibility studies have concluded that fuel ethanol produced by the Ethtec process will have a crude oil equivalent cost in the range of US$36-50 per barrel when the ethanol is used in blends with petroleum fuels. This cost of ethanol, without government subsidies, is highly competitive with the current cost of crude oil that is in the range of US$90-100 per barrel.
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Biorefining Processing crude oil in an oil refinery is an accepted practice worldwide. Importantly it allows the maximum value to be extracted from the crude oil, by making products for energy, and also products for plastics and other applications. Many groups are examining biomass in a similar light, with a view to creating commercial “biorefineries”. Such processing facilities would utilise biomass for energy but they would also create additional value by taking some of the processed biomass to make chemicals or other high value products. A number of overseas organisations are developing new processes to turn biomass into plastics and other chemicals. The US Government is allocating significant funds to speed up the development of a commercial biorefining industry. In 2007 the US Department of Energy made a provisional allocation of up to US$200 million to support a five year program for development of new biomass processing technologies that combine the production of renewable transport fuels with bio-based chemicals that substitute for petroleum based feedstocks. There are already commercial scale plants in the USA that produce renewable plastics.
Fuel pellets Wood pellet consumption in Europe is already significant for both domestic and industrial applications and is forecast to grow rapidly in coming years, particularly as a result of renewable energy legislation within the European Community. Japanese consumers use pellets for heating, and at least one Japanese Power Company is trialling large-scale pellet use for renewable energy. The use of pellets is limited in Australia. Over the past decade wood energy pellets have filled a minor niche in North American and European energy markets, mainly in the domestic heating sector. However in recent times wood pellets have become an increasingly important energy source for both the domestic and industrial energy sectors, mainly as a result of increased emphasis on renewable energy sources. This is expected to increase further as a result of policy initiatives by various governments, particularly in Europe. At present energy from biomass contributes approximately 4 percent of the total EU energy supply, predominantly in heat and, to a lesser extent, in combined heat and power (CHP) applications. By 2010, biomass is expected to account for as much as 8 percent of the total EU energy supply. This target underpins the European Energy White Paper (COM-1997-599) to double the EU’s renewable energy sources from 6 to 12 percent of gross energy consumption, and is also an element of the plan for the EU countries to meet their overall European Kyoto Protocol target (European Commission 1997). Use of biomass has been encouraged in several European countries through the introduction of domestic carbon taxes and grants for low carbon fuels. Pellets are manufactured by grounding wood into small particles and then dried and processed with readily available equipment. Compared with the original wood these pellets have relatively high energy content, and are easy to transport, store and utilise for heat and power. Wood pellets are short cylindrical pieces of biomass with a diameter 6-8 mm and are produced from sawdust, cutter shavings, chips or bark by grinding the raw material to a fine powder that is pressed through a perforated matrix or die. The friction of the process provides enough heat to soften the lignin in the wood. During the subsequent cooling, the lignin stiffens and binds the material together. The manufacturing process increases the bulk density of the feedstock from typically 100 to 650 kg/m3. The energy content of pellets is approximately 17.5 GJ/tonne with moisture content of 8-10 percent. Pellet plants can be built at a wide range of sizes and larger plants will generally offer economy of scale, but may also face greater costs for feed brought in from a larger growing area. Preliminary modelling has been carried out by Enecon (2007) to estimate the costs for production, transport and storage of pellets made in the Avon catchment and shipped to Europe. A pellet business appears to be quite profitable for a range of publicly quoted European pellet prices, however, pellet pricing in Europe varies significantly by country, and pricing within countries may vary significantly from year to year. Particular emphasis was given to a pellet business opportunity in this study because of its potential for short-term commercial exploitation.
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Integrated tree processing plant (oil / charcoal / bioenergy) The development of an integrated tree processing (ITP) demonstration plant at Narrogin in WA has been reported in depth by Western Power (2006) and Enecon (2001). Most of the engineering of the ITP plant was completed in 2005 and the plant tested during 2006. The concept is based on utilising in-field chipping harvest technologies to deliver 20,000 tonnes of chipped mallee (Eucalyptus spp.) wood, twigs and leaves to the plant per annum for processing to produce 7.5 GWh/year of electricity, 690 tonnes/year of activated carbon, and 210 tonnes/year of Eucalyptus oil. The ITP plant will incorporate a fluidised bed carbonising plant, steam distillation plant, thermal gasifier spent leaf combustor plant and a 1 MW steam turbine power generation plant. Additional benefits will be derived from greenhouse gas abatement scheme from renewable energy generation, rootmass fixation and standing woody crop biomass.
Regional Woody Crop Production The development of regional productivity models has been focussed on Bioenergy Species and Oil Mallee Species (as defined in the FloraSearch 3a report, Hobbs et al. 2009a). The models have been based on relationships between our observations of plantation productivity in the region and soilclimate models. Raupach et al. (2001) developed the “BiosEquil Model” and created a national productivity surface coverage suitable for computer-based Geographic Information Systems (GIS). The BiosEquil Model coverage provides coarse resolution (~1km²) data for Australia. This productivity modelling methodology has been described previously in the FloraSearch Stage 2 report (Hobbs et al. 2008c). Regional spatial and economic models for proposed Bioenergy industries are based our latest models (Hobbs et al. 2006, 2008a,c) for green biomass accumulation rates shown in Fig. 31 and Fig. 32. Alternative spatial production predictions have also recently been built using 3PG process models for the collaborative JVAP Regional opportunities for agroforestry project (Polglase et al. 2008) using low resolution soil information and CSIRO Lower Murray Landscape Futures project (Bryan et al. 2007b) where high quality soils data is available. These 3PG models are currently restricted to limited range of species and the model outputs were not available at the time of the analyses presented in this report. Bryan et al. (2007b) demonstrates that the Biosequil and 3PG models are strongly correlated and raises the issue that the highest quality and resolution biophysical data, and refined model calibration datasets, be used for future models of woody crop production. Equally, new model predictions must also take into account climate changes that will influence crop growth in the future. In this study we have selected two suites of species for bioenergy crop production. The first, ‘Bioenergy Species’ are discussed and detailed in the FloraSearch 2 and 3a reports (Hobbs et al. 2008c, Hobbs et al. 2009a) and include fast growing Eucalypt woodland and forest species (eg. Eucalyptus cladocalyx, E. occidentalis, E. camaldulensis/rudis). The second, ‘Oil Mallee Species’ include oil bearing, but less productive Eucalypt mallees (eg. E. polybractea, E. loxophleba ssp. lissophloia, E. porosa). The species chosen for each group are not limited to those listed above but can be substituted by similarly productive species suited to each location, soil and climate type. Coppicing species have a 30% increase in total biomass productivity in subsequent harvest resulting from having effectively more stems per hectare and established investments in root biomass.
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Fig. 31. Green biomass productivity of bioenergy species in southern Australia (at 1000 plants per ha).
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Fig. 32. Green biomass productivity of oil mallee species in southern Australia (at 1000 plants per ha).
76
Regional Industry Potential Analysis for Bioenergy 2008 New industry modelling approach The Regional Industry Potential Analysis (RIPA) is a methodology for evaluating the potential plantation productivity and industry product yields, economically optimum harvest intervals of woody crops, landholder annual equivalent returns (AER) from each industry type and location, and sensitivity analyses. The methodology of the Regional Industry Potential Analysis is detailed in the FloraSearch 1a and 2 reports (Bennell et al. 2008, Hobbs et al. 2008c) and should be read prior to reviewing the current outputs. The following section is based on that methodology and has been conducted for generic bioenergy markets. RIPA allows spatial and economic evaluations across existing available land with potential for woody crops, and new industries based on energy demands and supporting existing infrastructure. This study provides a hypothetical exploration of new investments in infrastructure or prospective industry types for woody bioenergy crops. In brief, the RIPA model consists of a series of models predicting potential spatial distributions of individual species based on bioclimatic relationships, spatial plantation productivities and yields of biomass components, point-based economic models of optimised annual equivalent returns from short cycle woody perennial woody crops, and transportation network models for each industry type. Finally, the RIPA integrates point-based economic models with spatial information to predict agroforestry equivalents to gross margin analyses (used to evaluate the short-term economic performance of crops and livestock). The integrated RIPA model is not scale dependant - for this study we have undertaken analyses at a one kilometre resolution but the following study (see Section 5, ‘Case Study 2: Woody Crop Potential in the Upper South East Region of SA’) is conducted at one hectare resolution due to the availability of more detailed mapping of region landuse, vegetation and soil mapping, and computational limitations. ArcGIS 9.1 (ESRI 2005) geographic information system software is used for these spatial models and analyses. The analyses presented in this section are focussed on electricity infrastructure and demands. The population and industry driven demands for other renewable fuel types (eg. liquid fuels from wood biomass, heating energy) are paralleled by electricity consumption and associated infrastructure. In this study we use electricity demands as a surrogate for demands in other energy types. Fig. 34 to Fig. 36 illustrates the scale and distribution of energy-hungry populations, electricity generation and transmission infrastructure, and current solid fuel (coal and renewable woody/ bagasse biomass) energy generation facilities in mainland southern Australia. We have mapped existing infrastructure which may be utilised for bioenergy industries (eg. roads, processing plants, electricity substations etc.; see Fig. 35, Fig. 36, Hobbs et al. 2008c). Our analysis of population densities, existing powerplants using renewable solid biomass, supply distances from major generators (i.e. >20MW), existing substation locations and peak loads, transmission lines and regional wood crops productivity (see Fig. 34 to Fig. 38) has identified priority locations for new bioenergy processing facilities and provide indications of their feasibility. We have geographically located hypothetical new facilities to support prospective new bioenergy industries (Fig. 38). Fig. 39 shows the current and proposed locations of liquid biofuel processing facilities in southern mainland Australia. The biodiesel plants are based on tallow, used cooking oil or vegetable oils (or in combination). The ethanol plants are largely based on cereals (eg. wheat, sorghum). However, the proposed Willmott Harwood ethanol/electricity plant near NSW’s north coast (Ethtec 2008) is planning to produce ethanol from lignocellulosic material such as wood, bagasse (waste from sugar production), crop stubble and municipal green waste. Freight costs are a significant contributor to the economics of bioenergy commodities, especially for producers of high volume / relatively low value product that need to be transported to distant mills and processing plants (Bennell et al. 2008, Hobbs et al. 2008c). Transport costs are dependant on vehicle travel speeds and are variable in their proportion of running costs and driver salaries. Transport paths
77
and associated freight costs have been mapped and evaluated between each hectare of land potentially available for new woody biomass industries and each existing or hypothetical facility. To increase the accuracy of spatial economic models we detailed different road types and surfaces to estimate maximum travels speeds on all major roads servicing southern Australia. The following equation was used in our models to account for transport costs by road networks: Transport cost multiplier = 0.0002466*Road Speed2 - 0.04553*Road Speed + 3.092 Using the base cost of $0.14/t/km return trip included, and road speed information Fig. 34 demonstrates the range of freight costs from highway to farm tracks. The economic module of the RIPA model incorporates all plantation establishment and maintenance costs for each biomass industry group of species. Planting densities are set at 1000 plants per hectare for all bioenergy and oil mallee species groups. Establishment costs are based on those reported by Hobbs et al. (2008c), Bulman (2002) and Mt Lofty Ranges Private Forestry (2006) for farm forestry woodlots and adjusted these values to 2008 prices given inflationary increases over time. For this study we have used a very generous establishment cost of $1300/ha for trees and mallees (similar to Polglase et al. 2008). However, broadacre agroforestry establishment costs in flat, simple and sandy landscapes could be around 25% less than this figure, or even less if cheaper establishment techniques are developed (eg. direct seeding). Average annual maintenance costs have been set at $15/ha/year to include occasional and sporadic activities such as firebreak control, supplementary fertilisers, followup weed and pest control. Harvest costs are set at $12/ green tonne using continuous flow in-field biomass chipping technologies described by Enecon Pty Ltd (2001). A summary of establishment, harvest and transport costs are presented in Table 23. The economics module then combines information on plantation productivities, changes in plantation product component yields (ie. biomass fractions) with plant age, establishment costs, maintenance costs, harvest costs and delivered feedstock values (see Table 12), a financial discount rate of 7%, and conducts sensitivity analyses to determine economically optimal harvest cycles (ie. on average, first = 8 years and subsequent = 5 years, slightly longer for slower growing species). Given the infant state of woody biomass crops for bioenergy in Australia and the world, and the wide range of estimates given for commodity values, we have explored several commodity values in our study and present a group of mid-range estimates (eg. $20, $30 and $40/green tonne). Spatial economics models have been constructed and applied to spatial surfaces of plantation productivities and road transport costs (where applicable) for all land potentially available to this new industry type in the region. Cash flows over the first 20 years of each production system (under a financial discount rate of 7%) are converted to Annual Equivalent Returns (AER) which allows direct comparisons with annual gross margin analyses for existing annual agricultural.
New industry economic and spatial evaluations Regional Industry Potential Analysis (RIPA) models have been applied for bioenergy and oil mallee integrated tree processing in the southern half of mainland Australia. Model outputs include parts of neighbouring higher rainfall and arid regions. However, our productivity models have not been calibrated for higher rainfall regions (eg. >700mm) and greater caution is required in interpreting economic results for areas outside of the FloraSearch zone. The RIPA model outputs of Annual Equivalent Returns for each bioenergy scenario are present in Fig. 41 to Fig. 44. Prospective bioenergy and oil mallee systems (Integrated Tree Processing, see Fig. 44) could provide substantial returns in the region but these require a reasonable investment in new infrastructure to be viable. Carbon sequestration in unharvested woody crops could provide additional benefits and are analysed in the following regional case study (see Section 5, ‘Case Study 2: Woody Crop Potential in the Upper South East Region of SA’) for a range of species groups including local native revegetation species. Carbon sequestration using unharvested Bioenergy species and current world carbon prices could provide reasonable returns to land holders when carbon trading is available (see Section 5).
78
Equally, if the average standing biomass and root biomass of harvested woody crops was included in carbon sequestration trading it could provide additional income streams to extractive agroforestry enterprises in the region. Fig. 33. Influence of road speed on 2008 freight costs used in spatial economic models. 0.35
Freight Cost [$/t/km return]
0.30 0.25 0.20 0.15 0.10 0.05 0.00 100
90
80
70
60
50
40
30
20
10
Road Speed [km/h]
Table 23. Primary production, freight costs and discount rate used in regional industry potential analysis for woody bioenergy crops in 2008. Site planning, setup and land preparation
Seedlings, planting, fertiliser and watering
Weed/Pest management and control
Total Establishment costs [$/ha]
425
800
75
1300
Production, Harvest and Investment Costs
Average Maintenance Costs ($/ha/year)
Harvest Costs ($/freshweight tonne of total biomass)
Freight costs – includes truck return trip ($/t/km)
Discount rate
Harvest cycle = First at 8 years, then every 5 years
15
12
0.14#
7%
Establishment Costs ($/ha) Planting density = 1,000 trees/ha
#
base of 0.14 $/t/km (depending on road/track surface, see Fig. 54)
79
Fig. 34. Southern Australian mainland population centres and sizes.
80
Fig. 35. Existing electricity infrastructure in southern Australia.
81
Fig. 36. Southern Australia electrical energy - present consumption centres and demand.
82
Fig. 37. Electricity demand versus supply distance in southern Australia based on population driven demand.
83
Fig. 38. Maximum green biomass productivity of bioenergy and oil mallee species in southern Australia (at 1000 plants per ha).
84
Fig. 39. Existing and potential bioenergy generation facilities with capacity or potential to use woody biomass feedstocks in southern Australia.
85
Fig. 40. Existing, currently offline and proposed liquid fuel refineries in southern Australia.
86
Fig. 41. Bioenergy annual equivalent returns based on $20/green tonne delivered price at existing and proposed facilities in southern Australia.
87
Fig. 42. Bioenergy annual equivalent returns based on $30/green tonne delivered price at existing and proposed facilities in southern Australia.
88
Fig. 43. Bioenergy annual equivalent returns based on $40/green tonne delivered price at existing and proposed facilities in southern Australia.
89
Fig. 44. Oil Mallee ITP annual equivalent returns based on $40/green tonne delivered price at existing and proposed facilities in southern Australia.
90
5. Case Study 2: Woody Crop Potential in the Upper South East Region of South Australia Trevor J. Hobbs1,2 1 2
Department of Water, Land and Biodiversity Conservation, Urrbrae SA 5064 Future Farm Industries Cooperative Research Centre, Crawley WA 6009
Introduction The natural resources of South Australia’s South East provide the backbone of a diverse range of ecosystems, agricultural pursuits, industries and vibrant communities. However, the landscapes and landuses in the region are affected by a number of both inherent and human induced natural resource management (NRM) issues. The Upper South East region (see Fig. 45, Fig. 47) is typified by low topography, poor water drainage, high water tables, inherently high soil and groundwater salt loads, and a history of substantial clearing of native vegetation for agriculture (Fig. 46). It faces significant NRM issues of water table induced salinity, dryland salinity, habitat and biodiversity loss, and wind erosion. The loss of perennial vegetation cover has contributed substantially to these NRM issues and it is well recognised that there is a role for agroforestry, perennial farming systems and habitat recreation to alleviate some of the problems faced in the region. The integrated management of our natural resources is a high priority for South Australians and is notably reflected in recent developments of policy and legislation in the State. The State Strategic Plan’s objectives of “growing prosperity, improving wellbeing, attaining sustainability, fostering creativity, building communities and expanding opportunity” (SA Government 2004) are strongly connected to our ability to manage our natural resources for the future benefit of all South Australian. The SA Natural Resources Management Act 2004 provides the underlying structure for government activities to better manage our natural resources. Overall state goals for NRM are detailed in the State Natural Resources Management Plan (SADWLBC 2006). The State NRM Plan identifies a 50 year vision for NRM in South Australia, and sets out policies, milestones and strategies to achieve that vision (SADWLBC 2006). State NRM Plan Vision: South Australia, a capable and prosperous community, managing natural resources for a good quality of life within the capacity of our environment for the long term. • Goal 1: Landscape scale management that maintains healthy natural systems and is adaptive to climate change •
Goal 2: Prosperous communities and industries using and managing natural resources within ecologically sustainable limits
•
Goal 3: Communities, governments and industries with the capability, commitment and connections to manage natural resources in an integrated way
•
Goal 4: Integrated management of biological threats to minimise risks to natural systems, communities and industry
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Fig. 45. The focus area of the Upper South East biomass study.
92
Fig. 46. Landuse and vegetation cover types in the Upper South East region.
Source: BRS (2004)
93
Supporting the development of the “best science” for NRM is the SA Centre for Natural Resource Management (SACNRM 2006) which develops and maintains partnerships with NRM Regional Groups, scientists and researchers, business and industry, governments and agencies, so that integrated natural resource management across South Australia is based on world-class research and development. The CNRM aims to create more sustainable environments through the development of new technologies and industries which benefit the environment and are economically sustainable. The CNRM undertakes a number of key research-related roles, including oversight of the South Australian R&D component of the National Action Plan (NAP) for Salinity and Water Quality. The CNRM identifies and negotiates supplementary funding and co-investment sources for NRM research, from both the public and private sectors. It has strong partnerships and linkages with business and industry stakeholders provide enhanced co-investment opportunities. The CNRM identified the need to better understand the ecosystem services and economic potential of farm forestry (agroforestry), woody perennial farming systems and revegetation in the Upper South East and subsequently contracted the FloraSearch group to conduct the research contained within this report. The priority setting for FloraSearch’s research into biomass industries in the Upper South East Region is based on the key natural resource management issues that can be alleviated or addressed by revegetation activities such as agroforestry, woody perennial farming systems (including fodder shrubs) and habitat creation. The current South East NRM Plan (SENRCC 2003) identifies a wide range of NRM issues for the region, its goals and proposed activities. The following is a subset of those issues, goals and activities which relate to the Upper South East sub-region and issues which may be addressed by revegetation of agricultural lands: Dryland Salinity Goal - To manage and reduce the spread and severity of dryland salinity and optimise the productivity of saline lands. •
Groundwater recharge reduced by increasing the water holding capacity of soil, increasing groundcover, establishing deep rooted species, establishing healthy plant growth and reducing pondage of surface waters.
•
Ecosystems enhanced and conserved.
Waterlogging Goal - To reduce the impact of waterlogging on agricultural land whilst recognising the value of protecting and/or reinstating historic wetlands for biodiversity. •
Alternative production systems, which are tolerant of waterlogged areas further researched.
Soil Acidity Goal - To reduce the rate of soil acidification in sandy soils and implement amelioration techniques to reduce the impact of soil acidification in affected areas. •
Slowing the rate of acidification by reducing nitrate leaching through planting perennial grasses and avoiding excess use of nitrogen fertilisers, recycling non-acid nutrients, rotating stock, and reducing the use of fertilisers containing large amounts of elemental sulphur.
Soil Erosion Goal - To prevent and/or reduce soil erosion through the adoption of appropriate land management practices and techniques. •
Landholders are informed and implement management strategies, which reduce erosion potential. These may include maintenance of surface cover, the utilisation of management options such as forestry, windbreaks and retention and protection of existing vegetation to reduce wind velocity, maintenance of soil fertility to enhance vegetative cover, timing of cultivation, control of vermin, grazing management, and the utilisation of cover crops.
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Ecosystem Fragmentation and Degradation Goal - To reduce the disturbance and destruction of habitats and improve the health and viability of terrestrial native vegetation, wildlife species and ecological communities. •
Protection and enhancement of existing areas of habitat on private and public land.
•
Improved diversity and quality of habitat.
•
Improved viability of existing animal and plant populations.
Capacity Building Goal - To ensure that the South East community is motivated, capable and has the capacity to achieve integrated NRM outcomes that benefit the economic, environmental and social wellbeing of the region. •
NRM information being accessed and research needs addressed.
The South East NRM Plan community consultative process identified the most highly ranked NRM priority issues for the region as Salinity (Land Resources), and Ecosystem Fragmentation and Degradation (Biodiversity). The focus on salinity is supported by evidence of the region’s high risk status identified by the 2001 National Land and Water Resources Audit (NLWRA 2001). Barnett (2001) quantifies that 272,000ha of the South East Region is currently affected by secondary salinity (water table induced). The National Land and Water Resources Audit (NLWRA 2001) found that 5.7 million hectares were at risk or affected by dryland salinity in Australia, and that in 50 years time this area could rise to 17 million hectares. Without substantial and immediate changes to agricultural systems to reduce groundwater recharge and impact of dryland salinity Australia's productive capability and wealth from farm exports will diminish (Stirzaker et al. 2000, 2002). In the South East Region 87% of the original native vegetation has been cleared, 11 plant and 22 animal species have become regionally extinct, 333 plant species are considered threatened at the State level (63 endangered, 88 vulnerable, 180 rare and 2 not yet listed), and 27 of the 49 pre-European plant communities (55%) are considered rare or threatened (SENRCC 2003). Many environmental and economic benefits can be achieved from increasing the use of perennial plant species in Australian landscapes (Australian Greenhouse Office and Murray Darling Basin Commission 2001). New plantations of woody perennial species can reduce groundwater recharge, dryland salinity, saline river discharges, wind erosion and drought risk, and increase landscape sustainability, biodiversity, livestock production, economic diversification and stability of financial returns. The losses from salinity affected agricultural land both in terms of productive capability and spatial extent are increasing every year in Australia. For this study the Upper South East Region is classified as the area (see Fig. 45) bounded by the northern edge of the Natural Heritage Trust’s South East Region (~35.49°S), the SA/Victorian border (140.96°E), a line between the southern edges of the Hundreds of Mount Benson and Jessie (37.03°S) and the SA coastline (~139.29°E) and covers approximately 1,922,456 hectares. It overlays the Local Government Areas of Naracoorte and Lucindale (northern half), Lacepede, Tatiara, The Coorong (southern two-thirds), and the Southern Mallee (southern quarter). The region supports a number of landuses predominated by cropping/grazing (~74%) and native woodlands, shrublands and wetlands (~24%) and minimal areas of forestry (700mm) and greater caution is required in interpreting economic results for these high rainfall areas. The RIPA model outputs of Annual Equivalent Returns for each biomass industry type are present in Fig. 56a-o. Summaries of predicted farmer returns for each Hundred subdivision in the Upper South East region are presented in Table 30. Overall, many new biomass industries can bring substantial financial returns to many districts in the Upper South East (USE) depending on farmer access to existing and potential markets or corporate/government/cooperative investment in new infrastructure. Immediate access can be gained to livestock fodder (see Fig. 56g-i) and firewood industry markets (see Fig. 56e, f) which are reflected in existing farm diversification in the region. Low to medium rainfall pulpwood industries for export or delivery to the new pulp mill planned for Penola are feasible over much of the region (see Fig. 56ac) and are likely to create the greatest return per hectare in many districts. Delivery of feedstock to the particleboard mill at Mount Gambier (see Fig. 56d) is not viable anywhere in the USE region due to relatively low feedstock values and modest transportation costs. Prospective bioenergy and oil mallee systems (Integrated Tree Processing, see Fig. 56k, l) could provide substantial returns in the region but these require a reasonable investment in new infrastructure to be viable. In-field mallee harvesting and distillation of Eucalyptus oil could also provide significant returns in landscapes suited to oil mallee species with minimal investments in infrastructure (see Fig. 56j). Carbon sequestration in unharvested habitat or oil mallee revegetation using low planting density (1000tph) and high-cost establishment techniques (tubestock plantings used in our analysis cf. cheaper direct seeding) provide minimal returns for farmers at present without co investment from governments (see Fig. 56m, n). Carbon sequestration using unharvested Bioenergy species and current world carbon prices could provide reasonable returns to land holders when carbon trading is available in South Australia (see Fig. 56o). Equally, if the average standing biomass and root biomass of harvested woody crops was included in carbon sequestration trading it could provide additional income streams to extractive agroforestry enterprises in the region.
118
Fig. 55. Existing infrastructure relating to biomass industries in the region.
119
Fig. 56. Estimated primary producer returns from a range of Regional Industry Potential Analysis scenarios in the Upper South East region. a) Export Pulpwood - Port Adelaide and Portland
b) Export Pulpwood - Portland Only
c) Australian Pulpwood - Existing pulp mills at d) Particleboard - Existing at Mount Gambier Millicent and Tantanoola, and proposed at Penola
120
Fig. 56. Estimated primary producer returns from a range of Regional Industry Potential Analysis scenarios in the Upper South East region. (continued) e) Bulk firewood to Mount Barker Small scale harvesting methods
f) Bulk firewood to Mount Barker Medium scale harvesting methods
g) In situ Farm Fodder Saltbush (Autumn value)
h) In situ Farm Fodder Saltbush (Spring value)
121
Fig. 56. Estimated primary producer returns from a range of Regional Industry Potential Analysis scenarios in the Upper South East region. (continued) i) Off-farm Fodder (saltbush) - Feedlots and stockfeed manufacturing facilities
j) Eucalyptus Oil Only - mobile oil distillation plants ($3.00/kg price) with product freighted to ports
k) Bioenergy Only scenario delivered to a new bioenergy plant located at Keith
l) Integrated Tree Processing scenario delivered to a new ITP plant located at Keith
122
Fig. 56. Estimated primary producer returns from a range of Regional Industry Potential Analysis scenarios in the Upper South East region. (continued) m) Carbon sequestration - Habitat Species (above-ground biomass +15% root biomass)
n) Carbon sequestration - Oil Mallee Species (above-ground biomass +20% root biomass)
o) Carbon sequestration - Bioenergy Species (above-ground biomass +10% root biomass)
123
287 237 216 346 234 253 332 338 285 306 350 218 247 355 236 356 213 234 350 321 316 297 272 316 236 220 269 212 334 325 274 323 315 223 341 239 253 270 263 299 314 356 197 190 233 301 353 206 278 313 295 270 236
126 153 168 224 126 92 131 121 115 156 131 148 155 131 168 122 182 183 115 184 143 164 104 107 164 107 158 114 148 143 179 203 189 174 157 94 151 159 130 158 122 145 119 115 182 140 126 124 198 156 152 149 164
57 76 86 125 57 34 61 54 49 77 61 72 77 60 86 54 96 97 49 97 69 83 42 44 83 44 79 48 72 69 93 110 101 90 78 35 74 80 60 79 54 70 52 49 96 66 57 56 107 77 75 73 83
83 114 150 114 65 78 122 108 88 99 113 126 108 121 139 103 169 130 86 96 94 90 82 81 122 49 87 49 111 116 92 90 94 157 121 86 94 74 67 82 109 136 65 55 146 85 106 88 121 102 77 88 100
1392454
121
402
415
352
476
-1714
229
280
147
71
101
124
Off farm Fodder
259 162 118 246 185 244 317 335 267 257 342 141 173 349 146 360 100 128 358 249 282 237 260 318 149 183 203 166 302 295 189 234 236 121 304 223 187 202 221 244 301 336 140 134 128 265 352 148 175 266 244 213 151
In situ Fodder (Spring)
-2023 -1208 -722 -831 -1779 -2181 -2732 -2568 -2088 -1702 -2793 -1183 -1031 -2685 -689 -2900 -239 -483 -2745 -1323 -2188 -1635 -2174 -2489 -835 -1900 -1405 -1932 -2540 -2472 -1124 -1251 -1200 -315 -2198 -2205 -1289 -1556 -1883 -1968 -2393 -2493 -1725 -1965 -515 -1930 -2848 -1434 -663 -2111 -1689 -1630 -981
In situ Fodder (Autumn)
329 553 682 1006 350 122 302 254 259 535 299 526 586 307 687 236 806 787 202 735 410 582 187 178 663 231 568 264 416 399 709 851 775 757 498 132 533 559 362 519 276 405 313 268 792 415 257 370 861 501 511 494 633
Firewood (medium scale)
232 434 565 764 272 62 189 162 174 381 177 433 454 185 548 131 671 613 117 543 295 423 115 102 512 167 428 198 285 261 536 635 577 604 343 70 409 411 275 381 181 265 245 203 615 303 157 297 663 350 384 381 483
Firewood (small scale)
318 434 565 764 277 186 375 351 284 411 392 433 454 396 548 369 671 613 339 543 390 431 239 284 512 207 428 217 422 402 536 635 577 604 450 183 409 412 305 410 331 436 245 206 615 367 378 297 663 420 397 383 483
Particleboard
368 413 439 533 368 310 376 360 349 417 376 404 417 376 439 361 463 465 348 466 396 431 330 335 432 335 421 346 405 396 457 499 475 449 419 314 409 424 374 422 361 400 355 348 463 391 367 364 490 417 412 406 431
Australian Pulpwood
110 124 132 160 110 93 113 108 105 125 113 121 125 113 132 108 139 140 105 140 119 130 99 101 130 101 127 104 122 119 137 150 143 135 126 94 123 127 112 127 108 120 107 105 139 117 110 109 147 125 124 122 130
Export Pulpwood Portland Only
9850 30388 35965 20717 34640 25433 28081 30525 42515 19462 24233 27963 21780 24433 33077 20796 21516 16378 23036 17272 38493 18924 30160 29982 21317 14153 34748 16811 26875 9421 26887 22305 16142 20284 15517 7551 19066 30706 36069 31951 37753 10064 36751 34322 19019 36320 19887 48028 26681 26543 35928 54898 30838
Export Pulpwood All Ports
Gross margin Cropping - Grazing Max Last 10 years
443 507 527 644 445 400 473 427 441 509 472 496 512 478 532 440 549 567 408 557 473 524 418 393 534 428 505 434 500 507 561 601 578 549 493 401 508 519 454 503 459 489 438 437 558 459 440 462 597 512 492 481 528 482
Gross Margin Cropping - Grazing Avg Last 10 years
Archibald Beeamma Binnum Bowaka Cannawigara Carcuma Colebatch Coneybeer Coombe Duffield Field Geegeela Glen Roy Glyde Hynam Jeffries Jessie Joyce (North) Kirkpatrick Lacepede Laffer Landseer Lewis Livingston Lochaber Makin Marcollat McCallum McNamara Messent Minecrow Mount Benson Murrabinna Naracoorte Neville Ngarkat Parsons Peacock Pendleton Petherick Richards Santo Senior Shaugh Spence (North) Stirling Strawbridge Tatiara Townsend Wells Willalooka Wirrega Woolumbool Avg. or [Total]
Potential Agroforestry Area [ha]
Hundred
Rainfall [mm]
Table 30. Summaries of expected annual equivalent returns [$/ha/yr] from existing cropping and grazing industries, and new agroforestry industries by subdivision.
570 448 368 424 491 293 413 405 486 394 355 410 469 310 419 306 338 376 311 394 589 449 385 319 425 476 523 444 523 443 457 339 446 376 450 302 495 496 558 573 451 390 408 387 389 628 362 422 407 484 594 542 427
324 385 419 546 324 247 335 313 298 391 335 373 390 335 420 315 451 454 298 456 362 409 273 280 410 280 395 295 374 362 443 499 468 433 393 252 379 399 332 397 315 367 307 297 451 354 323 319 487 391 383 375 409
3 14 21 45 3 -11 5 1 -2 15 5 12 15 5 21 1 27 28 -2 28 10 19 -7 -5 19 -5 16 -2 12 10 26 36 30 24 16 -11 13 17 4 17 1 11 0 -2 27 9 3 2 34 15 14 12 19
1 12 19 43 1 -13 3 -1 -4 13 3 10 13 3 19 -1 25 25 -4 26 8 17 -8 -7 17 -7 14 -4 10 8 23 34 28 21 14 -12 11 15 2 14 -1 9 -2 -4 25 7 1 0 32 13 12 10 17
1392454
121
402
380
382
433
370
12
10
125
CO2 Sequestration Habitat Spp
641 400 242 248 508 226 373 372 513 305 275 344 433 201 329 207 168 231 225 261 652 387 360 249 347 506 523 446 534 408 378 135 343 245 398 238 483 473 616 605 446 314 379 351 255 722 295 397 262 459 650 566 349
CO2 Sequestration Oil Mallee Spp
340 393 425 534 337 274 352 333 318 396 352 383 398 352 425 335 455 455 321 454 373 412 297 305 415 300 401 312 384 373 443 492 464 438 400 277 387 403 345 401 334 379 323 313 453 366 342 335 483 397 390 382 414
CO2 Sequestration Bioenergy Spp
368 413 439 533 368 310 376 360 349 417 376 404 417 376 439 361 463 465 348 466 396 431 330 335 432 335 421 346 405 396 457 499 475 449 419 314 409 424 374 422 361 400 355 348 463 391 367 364 490 417 412 406 431
Integrated Tree Processing @ Keith
110 124 132 160 110 93 113 108 105 125 113 121 125 113 132 108 139 140 105 140 119 130 99 101 130 101 127 104 122 119 137 150 143 135 126 94 123 127 112 127 108 120 107 105 139 117 110 109 147 125 124 122 130
Bioenergy Only @ Keith
9850 30388 35965 20717 34640 25433 28081 30525 42515 19462 24233 27963 21780 24433 33077 20796 21516 16378 23036 17272 38493 18924 30160 29982 21317 14153 34748 16811 26875 9421 26887 22305 16142 20284 15517 7551 19066 30706 36069 31951 37753 10064 36751 34322 19019 36320 19887 48028 26681 26543 35928 54898 30838
Eucalyptus Oil Only
Gross margin Cropping Grazing Max Last 10 years
443 507 527 644 445 400 473 427 441 509 472 496 512 478 532 440 549 567 408 557 473 524 418 393 534 428 505 434 500 507 561 601 578 549 493 401 508 519 454 503 459 489 438 437 558 459 440 462 597 512 492 481 528 482
Gross Margin Cropping Grazing Avg Last 10 years
Archibald Beeamma Binnum Bowaka Cannawigara Carcuma Colebatch Coneybeer Coombe Duffield Field Geegeela Glen Roy Glyde Hynam Jeffries Jessie Joyce (North) Kirkpatrick Lacepede Laffer Landseer Lewis Livingston Lochaber Makin Marcollat McCallum McNamara Messent Minecrow Mount Benson Murrabinna Naracoorte Neville Ngarkat Parsons Peacock Pendleton Petherick Richards Santo Senior Shaugh Spence (North) Stirling Strawbridge Tatiara Townsend Wells Willalooka Wirrega Woolumbool Avg. or [Total]
Potential Agroforestry Area [ha]
Hundred
Rainfall [mm]
Table 30. Summaries of expected annual equivalent returns [$/ha/yr] from existing cropping and grazing industries, and new agroforestry industries by subdivision. (cont.)
Discussion Any woody biomass industry development is underpinned by the selection of the appropriate species to match the product and yield specifications of each industry type. Once the selected species (or groups of species) have proven to meet elementary industry requirements the primary driver towards economic development is the ability to produce sufficient economic volumes of biomass. The specific green biomass productivity rates and above ground carbon accumulation rates reported in this study should be considered conservative estimates only, as optimum planting rates for each species and site has not been determined. Using higher planting rates is likely to increase plantation total biomass production by ~50% or more in the Upper South East. The above-ground biomass from dryland plantations of local native “habitat species” can sequester around 10.5 tonnes of carbon dioxide per hectare per year in the region with higher average values for “bioenergy species” of around 26 tonnes of carbon dioxide per hectare per year (see Table 31). A further component of annual carbon dioxide sequestration rates (but not accurately quantified in our study) is the additional biomass within plantation root systems (Gifford 2000). Dryland plantations of native species can provide many environmental services and economic opportunities in the Upper South East region. The value of perennial plant systems to reduce salinity and carbon sequestration is well recognised, with correctly managed and designed planting providing an additional positive contribution to ecosystems, habitats and biodiversity. A number of commercial opportunities exist for extending existing biomass industries in the Upper South East (USE) region. Biomass production rates and infrastructure support the expansion of livestock fodder industries, firewood for Adelaide metropolitan and surrounding markets, and pulpwood industries. Fodder shrubs are already a part of the existing livestock industries in the Upper South East region and much potential exists for further expansion of fodder shrubs to both increase livestock production and provide greater income stability when rainfall is less reliable. Firewood markets, especially to service our major population centres, are currently attractive to farmers in the region. Reasonable profits can be expected from firewood sales especially when landholders access the additional margins that can be gained from more mechanised harvesting systems. Pulpwood industries are extensive in the Lower South East region and much of the existing infrastructure can support expansion of these industries into lower rainfall regions in the neighbouring Upper South East. The planned new pulp mill at Penola will provide further opportunities for expansion. New industries based on bioenergy and Eucalyptus oil or combined in an Integrated Tree Processing plant (eg. Narrogin WA oil mallee based plant) would deliver economic returns to farmers in the region if there was a significant investment in the necessary infrastructure in the central part of the USE region. Existing broadacre annual cropping and livestock grazing provide an average gross margin return of around $121 per hectare (based on average returns 1996-2005, see Table 31). As could be expected with annual-based crops and pastures these returns are highly variable over time, ranging from losses of over $-200/ha to profits of over $400/ha in good seasons. Woody perennial crops provide more consistent returns as the robust woody crops generally survive droughted conditions and can make the most of unseasonal rainfalls. Our integrated spatial analysis of plantation productivity and farm economics (Regional Industry Potential Analysis) for several industry types show that expanded pulpwood industries could provide annual equivalent returns of between $132 - 1006/ha (region average range = $415 - 476/ha). Firewood industry average annual returns for the region would be in the vicinity $229 - 280/ha, and fodder shrubs in Autumn would be worth $147/ha. The prospective industries of bioenergy and Eucalyptus oil extraction based on new infrastructure at Keith would provide annual returns of around $380 - 433/ha, and single purpose carbon sequestration planting would create annual returns up to $43/ha (average $10 - 12/ha) for habitat and oil mallee plantings but could be higher than $500/ha (average $370/ha) for permanent woodlots of Sugargum (Eucalyptus cladocalyx) or similar species.
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Several of the woody biomass industries analysed here could provide economic returns which are competitive with existing cropping and grazing landuses in the region. Rather than a total displacement of existing annual cropping and grazing systems in the Upper South East region, we envisage these new woody biomass industries will provide new options and opportunities for farmers and existing industries of the region. These new options can be strategically placed to become an integral part of a healthy mosaic of new woody perennial-based and existing annual-based primary industries. In our landscapes that are subject to the risks of rising water tables, dryland salinity, soil erosion, habitat loss, climate change, and economic and community sustainability, there appears to be a sound future for woody perennial cropping in the Upper South East region.
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Table 31. Summaries of expected plantation productivities, environmental risks and landholder annual equivalent returns from existing and potential biomass industries (minimum, maximum and average values for 53 Hundred subdivisions). Plantation Productivity
Min.
Max.
Average
Stemwood Productivity [m³/ha/year] Pulpwood Species Bioenergy Species Oil Mallee Species Saltbush Fodder Species Habitat Species
8.79 19.29 4.52 2.35 4.29
30.06 36.21 7.76 4.03 7.36
17.57 26.27 5.85 3.04 5.55
Green Biomass Productivity [t/ha/year] Pulpwood Species Bioenergy Species Oil Mallee Species Saltbush Fodder Species Habitat Species
9.65 21.53 14.33 4.92 9.19
33.00 40.40 24.59 8.44 15.77
19.29 29.31 18.56 6.37 11.91
Carbon Dioxide Sequestration [t CO2 equiv/ha/year] Pulpwood Species Bioenergy Species Oil Mallee Species Saltbush Fodder Species Habitat Species
8.29 19.16 12.99 3.48 8.10
28.32 35.97 22.29 5.97 13.90
16.56 26.10 16.82 4.50 10.49
Environment
Min.
Max.
Average
Rainfall [mm] Deep Drainage [mm/ha/year] Risk Indices (0=low, 1=high) Index Dry Saline Land Index Habitat Areas #1 Index Salinity #2 - water table induced Index Wind Erosion Risk #3 Index Overall (average #1,#2,#3)
393 20.4
644 37.8
482 26.0
0.00 0.06 0.00 0.02 0.23
0.28 0.99 0.52 0.67 0.62
0.05 0.76 0.13 0.38 0.44
Industry Annual Returns ($/ha)
Min.
Max.
Average
93 310 183 62 122 -2900 100 190 92 34 49 274 135 293 247 -11 -13
160 533 764 764 1006 -239 360 356 224 125 169 534 722 628 546 45 43
121 402 415 352 476 -1714 229 280 147 71 101 380 382 433 370 12 10
Cropping/Grazing - Avg Last 10 years Cropping/Grazing - Max Last 10 years Export Pulpwood All Ports Export Pulpwood Portland Only Australian Pulpwood Particleboard Firewood (small scale) Firewood (medium scale) In situ Fodder (Autumn) In situ Fodder (Spring) Off farm Fodder Eucalyptus Oil Only Bioenergy Only at Keith Integrated Tree Processing at Keith CO2 Sequestration Bioenergy Species CO2 Sequestration Oil Mallee Species CO2 Sequestration Habitat Species
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6. Conclusions and Future Directions Trevor J. Hobbs1,2, John Bartle2,3 and Michael Bennell1,2 1
Department of Environment and Conservation, Bentley WA 6983 Future Farm Industries Cooperative Research Centre, Crawley WA 6009 3 Department of Water, Land and Biodiversity Conservation, Urrbrae SA 5064 2
Industry Priorities, Economics and Spatial Analyses In recent years Climate change has emerged as a significant driver to the greater adoption of renewable energies and carbon sequestration industries. The opportunities for renewable energy from biomass are expanding as the world realises that agricultural production systems of the future need to account for the risk of increased climate variability. Robust and productive perennial plant species can make an important contribution to the resilience of future farming systems. Wood products (pulp and paper, fibreboard and particle board) remain a high priority biomass industry with continued high level policy comment on the huge net import of wood fibre products into Australia (in the order of $ 2 billion annually), major new infrastructure developments (pulp mills) proposed for southeastern Australia, recent short falls in fibreboard feedstock availability in southern New South Wales and emerging MDF industries in Western Australia. Energy and metal refining and production industries face increasing pressure to reduce emissions of greenhouse gases (GHG) from the consumption of fossil fuels. The substitution of fossil fuels by renewable biomass has the potential to radically reduce the net carbon emissions from energy and metallurgical processing. Australia currently consumes >5500 Petajoules (1 PJ = 1015 joules) of energy ever year across our industrial, mining, agricultural, commercial and residential sectors. The trend and prices of energy is continuing to increase. In Australia electricity generation is predominantly based on black and brown coal deposits. Opportunities exist for greater use of woody biomass to generate electricity either as a coal replacement (or blend) in existing solid fuel plants or a co-product in a Narrogin style integrated wood processing facility. World oil prices have escalated from around US$25 in 2001 to over US$100/barrel in 2008 and although initially predictions that the current high price is only a short term prospect there are no clear indicators to suggest that oil will return to below the US$75 a barrel experienced in 2007. The Australian Government has recently renewed and expanded its commitment to developing and promoting renewable energy sources in Australia and is supported by market forces for Renewable Energy Certificates and currently high fossil-fuel energy feedstock prices. Biofuels are currently competitive with fossil fuels and should remain so even after current government excise assistance diminishes in 2015. The potential of lignocellulosic feedstocks for ethanol production is rapidly developing and will be encouraged by recent proposals to develop an Australian-first demonstration plant in northern NSW to use woody biomass to generate ethanol using lignocellulosic conversion. Technological developments in North American and Europe in the production of ethanol from wood through lignocellulosic processes is raising the profile of biomass as an important source of transport fuel within a 10 - 20 year time frame for large scale adoption. Woody cropping systems in the lower rainfall regions of southern Australia provide numerous opportunities for commercial development of bioenergy, carbon sequestration, wood fibres and livestock production industries. These systems can also provide a wide range of environmental and community benefit across Australia. The scale of this potential is immense with over 57 million
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hectares in the lower rainfall regions of southern Australia currently used for cropping and grazing that could potentially be used to develop new sustainable woody crop industries. Factors Affecting the Economic Performance of Mallee Production Systems illustrates there are numerous influences on the viability of woody crop production systems in Australia. Using oil mallee production systems in Western Australia we have shown the need to maximise productivity for commercial viability through better plant selections, and crop designs that can harvest excess water from the landscape. We are also aware of the need to balance woody crop production with other landuses, and that the goal is an optimal overall farming system that has components of new woody crops and existing industry types to be successful. Establishment, silvicultural, harvest and land management practices are highly important in optimising returns from these systems. Where additional (and often off-site) environmental benefits can be valued, these can potentially provide a new income stream to enhance these new crop systems. The Regional Industry Potential Analysis (RIPA) methodologies combine geographic information system (GIS) data with economic models to evaluate the potential commercial viability of the woody crop industries. This report highlights the full potential of this analytical technique through 2 case studies on The RIPA methodology was first described in the FloraSearch Phase 1 report (Bennell et al. 2008) using early estimates of productivity and preliminary models to illustrate the concept. This work has progressed and is becoming a sophisticated tool, able to support the systematic regional evaluation of perennial crop options at a range of scales. It incorporates improved species knowledge (eg. productivity estimates), industry developments, updated costs and returns and refinements in the modelling process. The methodology has been recently adopted and modified to undertake other spatio-economic analyses for other industries and regions across Australia (eg. JVAP Regional opportunities for agroforestry project, Polglase et al. 2008) and used to perform analyses for the Garnaut Climate Change Review (Garnaut 2008, Chapter 22 Transforming Rural Land Use). Case Study 1: Woody Bioenergy Crops for Lower Rainfall Regions of Southern Australia demonstrates there is immense potential to develop new woody bioenergy crops in southern Australia. Although prices of these new feedstocks are still tenuous, by comparing these product streams with internationally and Australian marketed commodities we can approximate likely feedstock values of woody biomass for these energy markets. The analyses do highlight the sensitivity of commodity prices and production rates on industry feasibility due to the cost of growing, harvesting and transporting a currently low-valued product especially in remote and less productive landscapes. Increasing energy (electricity, heat and transport liquid fuels) demands and prices, and emerging conversion and harvest technologies suggest that bioenergy crops will soon play an important role in Australian agricultural landscapes. Case Study 2: Woody Crop Potential in the Upper South East Region of South Australia identifies a region with significant potential for a wide range of woody crop industry types. It is in a region that borders a higher rainfall zone containing existing woodfibre industries (pulp, paper, particleboard production, woodchip export) and within contains existing interest and use fodder shrubs for livestock and firewood. New bioenergy industries and carbon sequestration potential offer new opportunities for landholder in this region and are likely to provide significant symbiotic (and perhaps competitive) economic returns to current cereal cropping and livestock grazing enterprises in the region. This study also explores the environmental benefits of woody crop systems and revegetation in the region. It has been used to identify specific districts that would most benefit from these new industry options. The current analyses presented in this report shows that many short-cycle woody crops and biomass industries are profitable across vast regions of southern Australia. The economic returns of several industry types in the region are complimentary or alternatives to existing land uses. The current and potential profitability and sustainability of perennial woody crops can provide landholders with alternative into the future.
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Future directions The evaluation of species will continue at a reduced level and be focused on evaluating provenance variability and also matching development species to emerging industry types with the greatest potential. The assessment of fodder value of selected woody species will continue and be expanded in conjunction with project work on grazing systems based on woody perennials in the Enrich project. We are also liaising on a project to evaluate charcoal use in metal smelting and an evaluation of the value of feedstock for lignocellulosic ethanol production may be considered. The growth of woody crops and product yields are critical for the commercial reality of FloraSearch industries. Work on productivity evaluations will be continued and, with additional collections of plant growth data, the accuracy of biomass productivity and yield models will improve and economic evaluations will become more robust. Economic evaluation and spatial analysis of farm and industry economics will be refined as new data becomes available, such as improved industry and market knowledge flowing from related projects, and improved understanding of the effects of biophysical factors on woody crop productivity, especially water movement and capture. Estimated farm returns from new industries will be compared to current land use options. This component of FloraSearch will have strong links with, and draw on results from the CRC’s New Industry and Marketing project. Utilising the economic and spatial tools described above to undertake a case study of pilot industry development option(s) in conjunction with an industry partner. Research into the domestication of selected focus and development species will be a central area of work. This includes germplasm collection and establishment of plant improvement trials for focus species. Multiple provenances will be collected for development species and included in the trials to collect field performance data. Feedstock characteristics will be identified that are appropriate targets for improvement by selection of germplasm to ensure product attributes are incorporated into germplasm selection. Future species development evaluations will also include weed and genetic pollution risks assessed in collaboration with related CRC programs and projects Agronomic experimentation on focus species to develop methods for production of short-cycle phase and coppice crops. Important aspects include system design, site selection, establishment techniques, the impact of planting density on productivity, nutrient response, coppice and sucker management, and susceptibility to herbicides, grazing and pests.
Optimising Productivity Through Landuse Planning, Agronomic Designs and Wateruse The woody crop research described in this report will provide improved genetic material, plant production systems and industry understanding for biomass crops that will meet emerging market demand. However the questions remain as to where to place these new systems in highly variable landscapes, what methods are available to predict and measure productivity and how to optimise returns taking into account the land resource, existing land-uses and new crop options. The approaches to planting system design in the study area can be broadly considered in the following ways: 1. Coppicing trees planted in belts within the productive cropping areas. Cooper et al. (2005) present a conceptual model for estimating the maximum scale of biomass processing industry that may be supported by woody crops grown in the medium and low rainfall agricultural regions of southern Australia. Based on the assumptions quoted, the analysis concludes that significant gains in productivity (20%) are required to achieve yields that will enable break-even with the reduced annual crop yields resulting from land lost to production and tree – crop interactions
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(competition for water). The rate of converting water to biomass, the capacity to capture excess water in the landscape and biomass price are key determinants of the returns possible and potential scale of biomass crops and processing industries in the southern Australian wheat/sheep belt. Re-introducing trees into agricultural landscapes as agroforestry systems establishes a tension between long-term objectives, such as increasing shelter, water use, nature conservation and harvesting tree products, and the short-term objective of maximising crop and pasture profitability (Sudmeyer and Flugge, 2005). Severing lateral tree roots (root-pruning), harvesting mallees and allowing them to coppice, or thinning trees for sawlog regimes increased the yield of crops and pastures in the competition zone (Sudmeyer and Flugge, 2005). In some instances, these increases were significant: root-pruning increased the annual return from crops grown in the competition zone of Pinus radiata by up to $548/km of the tree line at 1 site. Conversely, root-pruning reduced tree growth by 14–43% across all sites. Therefore, where trees provide benefits, such as shelter from damaging winds, the benefits of reduced tree–crop competition may not offset the consequent reduction in rate of tree growth. For mallee–crop alley systems on agriculturally productive soils, mallee growth rates must be high enough to compensate for crop losses in the competition zone. However, where management outcomes for dryland salinity are critical maximising water use in the landscape will be a critical outcome. 2. Block plantings of trees and shrubs – long term coppicing species and phase cropping On less agriculturally productive soils, block-planting trees and shrubs may be more profitable than alley systems or crops without competition. Woody species can be highly robust and reliable in areas that are poorly suited to annual crops and pastures and therefore do not need to offset the lost production from traditional crops. An example of this approach receiving close attention is the establishment of shrubs with forage value (Oldman Saltbush) in mixed planting with other perennial species to provide livestock feed when pasture species are unproductive due to climatic pressure. An alternative approach is to use fast growing, deep rooted tree species in a short term phase (3 – 5 years) to utilise water stored in the soil profile after which the trees are harvested and the land returned to annual crop production. Yield mapping from precision agriculture has shown that significant proportions of cropland effectively produce low to negative returns. There is potential for adaptation of current farming systems by targeting those sites with low returns and exploring the potential of better returns via woody biomass crop options. By understanding the optimal productive arrangement of annual and woody crops (belts or blocks) in a farming enterprise, issues of competition between new and traditional crop options can be systematically analysed to reduce opportunity costs to existing land uses. It is crucial to estimate economic returns of new systems with those from existing annual crops/pastures, accounting for additional risk, so that the most profitable option is applied at any point. Fig. 57 shows predicted economic return patterns across wheat paddocks with large areas that are potentially loss making indicating location options for land-use change. Maps like this will allow land managers to identify the extent of areas that are suboptimal for the current farming regime. Quantitative estimates will provide the baseline against which any new system will be measured. Future research needs to improve the capacity for informed decision making through farm level economic analysis for optimal arrangements of traditional and new crops including the net carbon sequestration of such arrangements to prepare farmers for participation in future carbon emissions trading or offset schemes. Some goals of the next generation of research include: 1. Identification of modelling needs and data availability for estimating spatial and temporal scales for productivity of key biomass species including forage. Leading to decision tools for location specific economic analyses of woody crop options based on yield predictions under a range of climate change, market and policy scenarios as compared with a range of other future and traditional farm options. 2. Test profitability and feasibility of spatial mix of different land, including insights on soil and climatic constraints that influence the suitability of plant species selected for development
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as new woody crops. Woody crop performance may be affected by different soil attributes to annual crops. 3. Fundamental understanding of carbon dynamics of woody perennial ecosystems in low rainfall regions. The almost certain farmer participation in national emissions trading or carbon offsets will demand carbon metrics to support accounting procedures.
Fig. 57. Regional prediction of economic return from wheat paddocks.
Source: Bertram Ostendorf, University of Adelaide (pers. comm. 2008).
More accurate information regarding the accumulation of carbon in plant roots, the sequestration of carbon in labile and non-labile C pools in soil, and any losses incurred via microbial turnover or root respiration is required if we are to link productivity of these woody systems with a capacity to sequester carbon. The impact of water availability in the landscape will have a major impact on plant productivity. Linking a growth model in the context of the three dimensional hydrological model will provide a tool for analysis of the growth and yield of tree crops in specified arrangements and locations in an agricultural landscape. There is considerable uncertainty about the likely rates of carbon sequestration and bioenergy production from reforestation in areas where farm-forestry has not been traditionally practiced. Improved woody crop yields by active water harvest are a potential mean of increasing yield in particular environments i.e. diverting water by low cost, paddock scale surface water engineering methods from source areas to woody crop sinks. Future work will develop the capability to design water harvest systems, estimate quantity and costs of water delivered to sinks, and predict yield response in terms of above and below ground biomass production. Potential outcomes of this approach include: 1. Demonstrate that water harvest systems for woody crops can be successfully integrated into farming systems with precision agriculture practices, reliable farm water supply, water erosion management and whole farm planning. 2. Experimental confirmation of the extent to which water capture can improve yield. A dataset suitable for validation of growth models incorporating enhanced water inputs.
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3. Process based prediction of the systems design and water supplied by water harvest systems. A GIS based water harvest design tool suitable for use by extension specialists to design woody crop planting configurations for farmers.
Future directions Apart from farm system development and profitability, adoption of new landuse options will need to take into consideration the emerging concerns of climate change adaptation and mitigation. Current agricultural enterprises and future woody crop production models must account for changes in the productive potential of our landscapes due climate changes that will influence rainfall, seasonality, temperatures and ultimately crop growth in the future. Community concerns about the reduction of food production capacity may also become important as more land is committed to biomass crops and carbon sequestration. New farming systems metrics will include: •
Assumptions that climate change adaptation is fundamental to future of agriculture - building soil carbon may be important in a drying climate for reasons of soil moisture storage and plant water relations
•
Measurement of key farming systems under development for water, carbon and energy ‘life cycles’ – this must include an understanding of the fate of new carbon
•
Taking a systems approach that includes the soil component and its potential to sequester carbon
The Australian Government has indicated that it will introduce an emissions trading scheme in 2010, and this is likely to allow the sequestration of carbon in trees, and possibly agricultural soils, to be counted as an offset against fossil fuel emissions. Similarly, there will be a national renewable energy target of 20% by 2020. Contracts to delivery certain amounts of carbon by a specific date will have to be underpinned by solid analysis and technologies to ensure delivery. Such predictions are not available for many of the tree species that are likely to provide carbon sinks in dryland farming areas. Likely products from the system include sequestered carbon and bioenergy. An Australian Emissions Trading Scheme will be implemented in 2010 (Wong 2008), and both industry and Governments are committed to making real reductions in their net greenhouse emissions. Farm forestry, through biosequestration and bioenergy projects, offers an immediate means of mitigating climate change by reducing carbon dioxide levels in a cost effective manner. Prior to the development of clean emissions technology, sequestration in farm-forestry based projects, and the substitution of fossil fuel emissions using biomass combustion provide a real and immediate opportunity to reduce net greenhouse gas emissions. Biosequestration thus forms a major component in both national and state climate change policies in reducing net greenhouse gas emissions. Reforestation is also a means of restoring catchment water quality, the protection of land from salinity and erosion, the enhancement of remnant biodiversity and opportunities for rural development. The carbon sequestration potential has been estimated, for forestry and agricultural options (Harper et al. 2003, Harper et al. 2007). For landholders, carbon investment thus provides a very real prospect of financing revegetation to increase farm sustainability (Harper et al. 2007, Shea et al. 1998). Climate change policy is particularly relevant as woody perennial systems can accumulate and store significant quantities of carbon in both living plant biomass and soil profiles. Economic evaluation of new crop opportunities requires reliable estimates of productivity (harvestable yield and carbon accumulation in plant biomass and soil profiles). Whilst there is a long tradition of forest growth modelling, accurate predictions in the agricultural belt are still difficult to make because existing models were developed for climate zones with high rainfall and higher average yield prospects than
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expected in the wheat/sheep zone. In lower rainfall regions the spatial variations of climate, soils and hydrological processes may have great influence on woody crop productivity.
Harvester Technologies The absence of large-scale harvest systems for short cycle woody crop species is a significant requirement for developing new biomass industries. Conventional forestry harvesting techniques based on single stem harvesting are too expensive when applied to short cycle woody crops. Short cycle coppice tree harvesters in the northern hemisphere have limited suitability for transfer to Australia because they have been developed to handle low density tree growth eg willow, of small stem diameter and consequently are neither robust enough nor appropriately configured for the branched form and dense wood of Australian species. The possibility of a dispersed layout of these crops in a low rainfall agricultural environment also creates significant challenges for cost-efficient transport of biomass from the harvester to the roadside. The sequence of steps to develop a suitable supply chain is a complex engineering task and the cost and risk of the exercise will limit private investment by a machinery manufacturer or any single aspiring commercial biomass production/processing industry while the industry in the current “start-up” stage of development. Significant government support is needed to advance the development of new industries until new technologies that create large-scale demand of biomass are in place. The principal products required by a development program will be a pre-commercial prototype harvester, a complete proven design for a supply chain for low rainfall tree crops, and commercial designs for the manufacture of the machinery required by the supply chain. This work is planned to be undertaken within the Future Farm Industries – CRC. Intellectual property will be managed by the CRC to ensure that these designs have value for a commercial manufacturer. This supply chain capability will enable low rainfall tree crops and their associated processing industries to expand to commercial scale. The three sub-projects will be: •
Supply chain analysis and logistics to ensure that the scale of the supply chain components is appropriate and work efficiently as an integrated system.
•
Harvester design, prototype development and field testing. This sub-project may also be required to design and fabricate some other supply chain machinery as required to enable proper testing of the prototype harvesters and supply chain logistics.
•
Analysis of global biomass industry prospects, including engaging with other developments in the oil mallee industry and investigation of the commercial prospects of the harvester in other short rotation woody crops in Australia and overseas.
Economic Feasibility There is renewed interest in large-scale production of biomass from woody crops reinforced by the growing national and global resolve to reduce fossil carbon emissions, impose fundamental restructuring on the energy sector and support the adaptation of farming systems. Current national activities indicating progress include the successful conclusion of Verve Energy’s IWP (Integrated Wood Processing) demonstration in WA, the recent investment by Willmott Forests in secondgeneration ethanol Research and Development in NSW and the large body of knowledge and experience now available on woody crop biomass production demonstrated by the Salinity CRC FloraSearch and related projects. However, private investment in growing and processing biomass is still uncertain and considered risky. Woody crops need further technology development and ongoing emergence of large-scale market demand to improve actual and perceived economic viability.
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The opportunities exist for the development of a business analyses capacity based on the skills and knowledge accumulated in various aspects of the FloraSearch and related project work. In the future this can supply services in the following areas: •
Support production and business development on the supply side at the farm level.
•
Analysis at a regional scale to provide a service to aspiring processors needing high quality information as an input to their feasibility assessments.
•
Investigate policy questions related to emerging biomass industries i.e. "What should the public policy emphasis be in the production of transport fuels using emerging second generation technologies given the current imperatives of climate change mitigation?” A discussion paper will focus on the policy issues as well as some of the implications for farming areas within Australia.
Feasibility assessment will highlight the need to develop the services and business stream in industry development (see Fig. 58). There appears to be promising economic prospects for both biomass production and processing to proceed but commercial operations have been slow to emerge in Australia. Public-good outcomes, not only in GHG emissions control, renewable energy targets and climate change will be important to the future success of new crops and also in managing the external costs of environmental damage arising from annual plant agriculture in Australia. Pannell (2008) presents a theoretical treatment of how to deal with this mix of public and private benefits in encouraging environmentally beneficial land-use change. He proposes that public investment in technology improvement should be applied where ‘public net benefits of land use change are positive and private net benefits are (currently) negative, but not highly negative’. Future work should retain the objective that public investment in new industry development will achieve technology advance and that the economic viability of the new technology will deliver public and private benefit. In the context of ‘supply side development’ future programs can deliver project specific biomass supply feasibility assessment to major aspiring processors and, based on this experience, inform across-industry coordination of biomass supply development and progressively build a generic assessment capability suitable for any woody biomass industry nationwide. This experience will enable the evaluation of options and stimulate development of service industry participants for new biomass supply industries.
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Fig. 58. Biomass supply flow chart. Biomass supply attributes Design systems
Manage crop
Farm plan Site selection Water capture Predict yield Seek collateral benefits Harvest plan R&D Farm economics
Select species Improved seed Seedlings Establishment Agronomy Harvest regime Coppice R&D
Operate supply chain
Biomass form and composition (component %, water %, embodied carbon emissions and energy)
Harvester
Reliable delivery on specified schedule.
Chasers
Quality expressed in chip dimension, oil content, % of problem fraction
Road transport R&D
Risk, one harvest machine or two? Stockpile and segregation options.
Many
Regional local government support. Regional infrastructure
growers Operations stream
Single processing operation in each region
across Services and business stream
~75km radius
Contracted price in bulk and implicit cost for each component
Legal and financial
Planting services Seed merchants
Supply chain manager
Grower finance
Nurseries
Harvest plan
Grower contract Pooled supply contract Finance Carbon/energy accounting
Planners
Quality control
Advisors Contractors
A Growers' model may be used to run scenarios (using Imagine from the MIDAS stable; Imagine is a discounted cash flow analysis extended over the appropriate term for any project usually 20 years) to compare equivalent returns of woody crop and annual crop/pasture activities and to determine the economically viable extent of biomass production for a typical farm. There are now sufficient WA based data for mallee crop management, systems design and supply chain operation to enable modelling of production, cash flow and profitability of this crop. However, with careful judgement by experienced researchers these data are adequate to guide estimation of likely performance parameters across a wide range of wheatbelt woody crop types and regions. The Buyer's model can be developed to analyse the buyer’s perspective on supply side issues. This feasibility assessment will generate information on biomass supply parameters pertaining to quantity, quality, price and risk associated with this new production system. The model would enable evaluation of the relative importance of these supply parameters from the perspective of the buyer as well as the seller of biomass. Currently Australian policy is focussing on a preliminary development of 'what should be done' - in this case renewable fuels. The reasons for government assisting in the development of biofuels industries are varied and with mixed outcomes. Issues such as: energy security; climate mitigation; health; and regional development are considered but often not explicitly addressed. The development of policies that specifically address environmental aspects of biofuel production is limited. There are significant policy positions that have been developed by the EU and the US in relation to production and trade. Within Australia some policy instruments are in place but there is an expectation that the interest will significantly increase in relation to climate change. One of the main advantages of biomass to energy systems is that they are flexible in their delivery. This, however, can lead to confusion as systems are put in place that may not meet policy outcomes (e.g., a corn to ethanol systems is unlikely to contribute to climate mitigation strategies). This leads to confusion within the market as the public are not confident in the products that they consume meet their expectations (e.g., ethanol is good for the environment).
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There are significant policy developments occurring internationally (e.g., climate change and post Kyoto negotiations) that could be addressed if the specific policy instruments are in place to meet the goals (eg. mitigation of climate change). There are also policies in place within Australia (eg. the NSW Biofuel Act 2007) and internationally (eg. EU directive of a target of 5.75% renewables by 2010, Commission of the European Communities 2008) that look to meet some of the opportunities for biofuels. The links between some of the key policy issues (i.e., climate change and biofuel production) need to be more clearly defined. This would lead to a much clearer understanding of what instruments could be developed to meet the nominated goals.
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References This series - FloraSearch 3 Hobbs TJ, Bennell M, Bartle J [eds] (2009a) ‘Developing species for woody biomass crops in lower rainfall southern Australia. FloraSearch 3a. Report to the Joint Venture Agroforestry Program (JVAP) and Future Farm Industries CRC. Publication No. 09/043.’ (Rural Industry Research and Development Corporation: Canberra) Hobbs TJ, Bartle J, Bennell M [eds] (2009b) ‘Domestication potential of high priority species (Acacia saligna, Atriplex nummularia & Eucalyptus rudis) for woody biomass crops in lower rainfall southern Australia. FloraSearch 3b.’ Report to the Joint Venture Agroforestry Program (JVAP) and Future Farm Industries CRC. Publication No. 09/044. (Rural Industry Research and Development Corporation: Canberra) Hobbs TJ [ed] (2009b) ‘Regional industry potential for woody biomass crops in lower rainfall southern Australia. FloraSearch 3c.’ Report to the Joint Venture Agroforestry Program (JVAP) and Future Farm Industries CRC. Publication No. 09/045. (Rural Industry Research and Development Corporation: Canberra)
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Australia
Regional Industry Potential for Woody Biomass Crops in Lower Rainfall Southern Australia FLORASEARCH 3C A report for the RIRDC / L&WA / FWPA / MDBC Joint Venture Agroforestry Program Edited by by Trevor J. Hobbs August 2009
Regional Industry Potential for Woody Biomass Crops in Lower Rainfall Southern Australia FLORASEARCH 3C RIRDC Pub No. 09/045
SPINE
